advocacy representing common interests preserving the benefit advancing member issues work with...

Advocacy Representing common interests Preserving the benefit Advancing member issues Work with White House/OMB, Defense, Homeland Security, Transportation, HASC, SASC, HFSC, HAC-D, SAC-D, SFC, GRO, HSGAC, W & M, Banking

Past year 3 percent withholding 1099 requirement Interchange fees Coburn amendment Burr Bill (S. 277) Bowles-Simpson Defense Budget Review

2011 Active2012 More Active Big issue is the budget Perennial disagreement over cuts versus taxes Budget Control Act (BCA) August 2011 Raised the debt ceiling Pledge to cut deficits $2.1 T from 2012-2021 Half from Defense Chainsaw running in the basement Sequester not neutralDefense represents 19 percent of budget but would absorb 50 percent of cuts--$500 Billion more from Defense in addition to $487 B already taken and $178 billion under Secretary Gates13 percent of budget by 2017

Key Dates April 13, 2011President presents plan to reduce deficit by $4 T August 2011Budget Control ActSupercommittee November 21, 2011Supercommittee fails January 5, 2012President and SecDef announce new defense strategy at Pentagon January 26DoD budget released November 6Election day December 31Bush tax cuts expire January 2Sequestration begins January--Debt Ceiling increase January 1Payroll Tax Cuts Expire January 3113 th Congress begins

Armageddon Perfect Storm Most predicting no action before election January 2013 Debt Ceiling reacheddefault threatened Tax cuts expire Continuing resolution needed Medicare doctor increases Payroll tax cut expires Sequestration takes effect Combination4 percent hit on GDP

Defense Budget Timetable Pentagon and OMB lawyers already studying how sequestered cuts would take place. Comptroller looking at cuts to individual accounts, i.e., Navy shipbuilding or Army O & M. PanettaAcross the board to all Defense Programs. Inflict severe damage on Department of Defense. Planning would have to begin this summer $56 B in added Defense Cuts in January 2013 Depends on baseline2013 real cuts under sequestration in $30 to $50 Billion range Comes in the middle of January 2013 Perfect Storm Bush tax cuts of 2001 and 2003 expire at year end Sequester start looms Need to raise debt ceiling (could be November 2012)

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

Budget Control Act of 2011 Half of $1.2 T from Security (050) Exempts health care, retirement, wars with option to exempt military pay Ax falls on O&M, Procurement, R&DO&M outlay rich Committee could come in under $1.2 Tdeduct passed legislation from the $1.2 T 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 sectorsAir Force, Army, Navy base operations reductionsi.e.,6500 IMCOM positions cut in 2012

Budget Control Act--Defense Cant 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

Sequestration Indiscriminate cuts with half aimed at Defense HBC Action March 29replace sequester with reconciliation instructions to six committees for cuts, for subsidies for health care insurance, child tax credits, and the social services block grantopposed by Democrats E & C CommitteeApril 25Cut healthcare, rescind funds for other programs opposed by Democrats April 23Veterans programs ruled exempted Senate Budget Committee Bowles-Simpson Majority Leader ReidAdhere to Budget Control Act

Strategy and 2013 Defense Budget 2 more rounds of base closures2013 and 2015 By 2017, the Army is projected to shrink by 72,000 soldiers to 490,000, the Marines will shrink by 20,000 to 182,000, the Navy will shrink by 6,200 to 319,500 and the Air Force will shrink by 4,200 to 328,600. Pre-war levels. 80K reductionMarines and Army Reduce EuropeBrigades out of Baumholder and Schweinfurt About 30K each. Keep Vicenza and Vilseck brigades, Okinawa 2500 personnel from Okinawa to Hawaii5000 to Guampares back $21 billion ramp-up in Guam Military Retirement Modernization Commission that will have the time and staff to look at this very complicated area of military compensation and make recommendations.

Strategy and 2013 Defense Budget Tricare fee increase Protect number of (commissary) stores Cut DeCA $5 M Top line $525 billion2 percent less than 2012, $259 billion less than programed over 5 years--$487 billion less over 10 years still above 2008 levels Personnelone-third of budget represents on 10 percent of the reductions Efficiencies--$60 B over five yearsArmy--$19 B, Navy-- $6 B, AF--$7 Bother $30 Billusory?? Pay raises in 2013 and 14 but more limited in 2015

2012 changes DeCAorganizational restructuring, $6M savings, eliminate outreach and marketing, health and nutrition program, annual commissary assessment, eliminate administrative positions Convert commander AAFES and NEXCOM to SES

Appropriations Apportionment Hard decisions are made on outlays in Appropriations Committees SAC 302 (b) allocations April 17--$511 B HAC April 24-- $519 B In past, would make up in supplemental requests Flexibility door closes for restoration as supplementals are more closely monitored.

FY 2012 NDAA Funds DeCA, Exchange, and MWR request Report on extending commissary and exchange benefits to Federal employees overseasreimbursed 3% withholdingexempt 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-$50 M -- Sec 645

FY 2013 NDAAHASC Mark-up Extend through 2018 period of eligibility for 2 years of commissary and exchange benefits for involuntarily separated military Eliminates requirement for SecDef to report changes in merchandise restrictions required to prevent violation of treaty obligations of the U.S. & host nation laws Establish guidelines for identification and purchase of fresh meat, poultry, seafood, produce and other products raised through sustainable methods Personnel S/C resale hearingsOctober??

CBO Budget Option Findings 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.

.S 277Senate Veterans Affairs Bill Passed full Senate Veterans Affairs Committee Despite assurancesstill a threat Eliminates all Title 10 prohibitions to CBO option Eliminates key Title 10 protectionspricing, 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 system7 percent price increase Saves $2.5 B from 2013-201 6

Other actions aimed at resale Coburn Back in Black Report Coburn amendment to 2012 NDAA Bowles-Simpson adopts CBO proposal S. 277 still alive in committee H.R. 649Welch/Doggett Consolidate by January 1, 2013 No appropriations used thereafter Referred to HASC Title 10 currently prohibits Sitting in committee

March 6, 2012 testimony--SBC An End to Commissaries and Exchanges. On benefits sidean end to commissaries and exchanges should be seriously considered. These provide benefits unequally and somewhat anachronistically to military service members and their families, and it makes more sense to eliminate them than to consider further cuts in compensation. Michael OHanlon Brookings Institution

O&M Defense Commissary Agency and ExchangesHASC 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 Optionelimination of exchanges in favor of self- sustaining enhanced commissaries exclusively selling high profit exchange goods Exchanges on life support except where they can sill make a profit selling limited range of goods and overseas where they will required some appropriated fund supportexchange support of MWR stops

ALA Mobilizing

Prevention Pre-emption Preservation

Total Market Capture What is the total amount of discretionary spending for the military marketplace? 3 percent pay raises means we lose ground each year if sales are flat What are we capturing? Sales--$16 BMarketplace $200 B 1 percent increase--$2 billion Why and Why not? Use it or lose itespecially for younger troops Coalition driving to increase sales

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 ROIsavings, COLAs, infrastructure improvements, family employment, Industry in-kind support, transportation efficiencies, retention value Cost constantother programs increased 100-200% Accountable stewards DeCA $1 billion in annual efficiencies since 1991Efficiencies continueDeCA 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 14Washington 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 governments 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.

The case Compassionate Economic National Security Mission

Build the economic case $20 billion over 20 years Challenge CBO assumptions & findings Families save $6500 to $7000 per year Boosting patronage & Protecting benefit one in same 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: Weve always had co- paysits called mark-ups and surcharge

Economic Case 70 percent increase in food stamp redemption Sunk costs buying the car but not putting gas in it Sales imperativeincrease share of AD who use benefit Tax savings alone justify benefit Family and Veteran employment Contribution to economy/balance of payments

Economic case 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 membersbillions in additional household income

Compassionate Case Military coming off fighting two wars Families under stress Compensation being squeezed in other areas Care for those deployed Care for those at home Multitude of benevolent causes run through system Veteran and wounded warrior hiring

National Security Mission case Ingrained in OSD fabric Not inextricable without a major cost Adapts for force structure Brigade re-stationing BRAC Schweinfurt, Baumholder, Okinawa relocations Underpins transportation system Maintains ties with installations Supports deployed forcesforward combat areas95 sites in theaterresale workers deployed All things to all people world-wide Underpins DoDs overseas transportation system $150,000 to $200,000 to train a troop and $1 million for pilots, doctors, specialists

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 $20 Billion to facilities and programs since 1992 Have taken capital loss at closed and realigned bases Cant take whats not yours

Wilson/Davis Op-Ed8/15 The commissary system delivers a remarkable $2.08 return benefit for every dollar expended... one of the federal governments 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

Galvanizing Industry Support 250 of the major consumer packaged goods companies in the United States. Brokers and distributors Specialty vendors Already supports USO, Fisher House, Wounded Warriors, NMFA, NIB, NISH and other causes

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

Comprehensive approach to supporting military families, crossing traditional agency boundaries affording a coordinated approach. Our industry partnerships can expand the capacity and quality of support by channeling philanthropic and cause marketing support while strategically expanding the communication about existing support infrastructure already in place on base

Other support programs School feeding program OCONUS Facilities at home Facilities downrange Welcome Home Events Personal Shopping for wounded warriors Community engagement contests/prizes You Made the Grade rewarding military kids Social Media Helping friends/family connect Smooth Move Assisting with PCS transfers Military Star proprietary credit card lower interest rate www.shopmyexchange.com website www.shopmyexchange.com Help Our Troops Call Home Gifts from the Home front

Next stepsWhite House Continuing strategy sessions to define objectives and develop programs Orlando ALA ConventionAnnounce Major Cooperative EffortIndustry Support Joining Forces umbrella branding of major ALA & Resale initiatives including: Events Sweepstakes Competitions Cause Promotions and Sales Living well and family member employment

ALA Priorities Support Coalition Patron awarenessPower of viral internetsales increasesbenefit valueget non-shoppers in Raise visibility with White House and agencies Dont lobby each otherhave meaningful outreach Support adequate budget levels Support shipment of American products Support funding for BRAC affected sites Protect immunities Affordable, one-card access Support Guard and Reserve Support familiar war zone offerings Expand benefit to more vets

ALA 2012Congressional and Public Policy Forum June 19 Rayburn House Office Building Critical industry supports House and Senate Issues based 2013 impact and 2014 Budget Deliberations, Basing, Force Structure, Contracting in a volatile budget environment, Congressional actions affecting resale, Executive Branch initiatives House and Senate leader perspectives Administration perspective

ALA & Resale Protecting the Benefit

advocacy representing common interests preserving the benefit advancing member issues work with...

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