Commissary funding will be slashed by $1 billion over the next three years, Defense Secretary Chuck Hagel confirmed Monday -- a move that will leave the military grocery provider with less than a third of its current funding.
"We must now consider fair and responsible adjustments to our overall military compensation package," Hagel said. "Over three years we will reduce by $1 billion the annual direct subsidy provided to military commissaries, which now totals $1.4 billion."
The cut, first reported by Military.com in January, will be included in the upcoming 2015 Defense Department budget proposal as one of many personnel cuts. Officials are also requesting cuts to Basic Allowance for Housing (BAH), annual military pay raises and overall troop levels.
Hagel said the Defense Department is "not shutting down commissaries," but did not give any details on how the Defense Commissary Agency will find $1 billion in savings over the next three years. More information is expected to be included in the full budget proposal released March 4.
Industry insiders have laid out a series of potential savings proposals, including cutting the tax payer subsidy for shipping groceries to overseas stores, raising the surcharge included on every commissary purchase and selling products above cost.
But experts worry that putting in place those proposals or others like them will reduce the cost savings shoppers see by using the commissary instead of civilian grocers, which DeCA estimates to be just over 30 percent.
"What DoD is expecting DeCA to do is to offset a billion in cuts by raising prices," said Thomas Gordy, president of the Armed Forces Marketing Council, which represents brokers doing business with military stores. "That means military families will have to pay a billion more per year in order to keep their commissary."
Gordy worried that changing the pricing structure at the commissary will result in reduced patronage and, eventually, the system's demise. Despite DoD assurances that closing commissaries is not in their game plan, that could be what ends up happening.
"The question then becomes: how long will the patron be able to shop at the commissaries if there's no savings?" he said. "At the end of the day this is a broken promise because it's ending the non- compensation benefit. The benefit is not the store, the benefit is the savings, and they've taken that away."
"Drastically reducing the commissary funding will raise prices and amount to a cut in pay for service members, veterans, and their families," said Candace Wheeler, spokesperson for The Coalition to Save Our Military Shopping Benefits.
"The savings commissaries provide are critical to helping military families make ends meet. Without them, families will be forced to make tradeoffs in their household budget – deciding between getting the car repaired, sending their kids to the school of their choice, or saving for college and their future."
DeCA's current budget of $1.4 billion pays for commissary employees, shipping food overseas and keeping the lights on. A five percent surcharge on all purchases funds new construction and store maintenance. Baggers who work in the stores are paid only in patron in tips.
Finding savings within DeCA's budget by making major alterations to how the commissary operates, including raising prices or the surcharge, would require congressional approval. But whether or not lawmakers will give the go-ahead to such sweeping changes remains to be seen.
"It's going to be a tough sell, but Congress has to give DoD some help on the bottom line or we're in for a lot worse," said Joyce Raezer, executive director of the National Military Family Association (NMFA).
NMFA was one of 23 military support or advocacy organizations invited Feb. 24 to a first of its kind Defense budget preview with top Pentagon officials, Raezer said.
"We've never had this kind of access to leaders at this level in this stage of the budget process. I think they know things are hard, they want to reach out to the troops and they want to put the message out there that is how tough this budget situation is," she said. "They didn't have to do this."
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