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Industry group slams DoD plan to cut commissary budget

Feb. 25, 2014 - 03:07PM   |  
A display of fresh produce in the Fort Bragg North Commissary, N.C. The American Logistics Association says the proposed 2015 defense budget essentially means commissaries will be shut down over time.
A display of fresh produce in the Fort Bragg North Commissary, N.C. The American Logistics Association says the proposed 2015 defense budget essentially means commissaries will be shut down over time. (Thomas Hannan / Defense Commissary Agency)
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The Pentagon’s new proposal to drastically reduce commissary funding goes too far, says an association representing companies that supply products to commissaries.

In unveiling his proposed 2015 defense budget Monday, Defense Secretary Chuck Hagel emphasized that the Defense Department “is not shutting down commissaries.”

But the American Logistics Association says that in effect, that’s what will happen. “Make no mistake: pulling the funding rug out from under these operations will shutter these stores over time,” the association said in a statement issued Tuesday.

The plan announced by Hagel would slash annual taxpayer subsidies to the commissary system by more than two-thirds. Over three years, the annual Defense Commissary Agency budget would drop from its current $1.4 billion to $400 million.

Only stores that are overseas and in remote locations would continue to receive direct subsidies.

Hagel also said commissaries “will be able to continue to provide a very good deal to service members and retirees — much like our post exchanges, which do not receive direct subsidies.”

In effect, that means prices would increase in order to fund the stores’ operations. A former defense official who spoke on condition of anonymity estimated that prices in commissaries would have to rise by an average of 20 percent to accommodate the $1 billion reduction in the taxpayer subsidy.

Details are not yet available on how the price increase would unfold, whether it would focus on marking up prices on products, as the exchanges do, or raising the current 5 percent surcharge paid by all customers at the cash register, or a combination.

Under current law, the Defense Commissary Agency can’t mark up prices on its own; products must be sold at cost from the supplier. The 5 percent surcharge is also set by law. Those laws would have to be changed before the Pentagon could order the Defense Commissary Agency to mark up prices or raise the surcharge, which is used to fund construction and renovation of commissaries.

ALA noted that commissary customers save thousands of dollars each year on their groceries, with discounts ranging from 30 percent to 50 percent. Average savings, according to the latest price comparison survey, is 30.5 percent.

Every part of the defense establishment should share in belt-tightening, the association stated, noting that the Defense Commissary Agency has “dramatically reduced” its required funding over the last 20 years, cutting $700 million from its annual operating budget.

The ALA noted that the commissary program is one of the few DoD programs that has had a clean audit for 13 years. “This means they can account for where each and every dollar goes ... something that can’t be said for many DoD programs.”

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