Military-base stores save taxpayers money

Base grocery and department stores provide military members, retirees and their families with shopping discounts worth $4.5 billion annually. But that’s just a fraction of the overall value these stores deliver to the military and the nation, a new study from American Logistics Association argues in response to fresh threats on the shopping benefit.

Discounted shopping, for example, dampens the military’s need to pay members larger cost-of-living allowances overseas and in high-cost areas of the U.S. like Hawaii and Alaska, saving $738 million a year, the report claims. Also, base stores are the biggest employers of military family members, with 50,000 spouses, dependent children, retirees and veterans on the payrolls, adding $884 million a year to military household incomes.

And roughly $545 million a year from store operations are reinvested in base infrastructure, from profits of military exchanges (base department stores) and from a 5 percent surcharge collected at cash registers in commissaries (base grocery stores). These facilities and capital improvements become assets on the balance sheet of the U.S. government.

Commissary and exchange customers also avoid state sales tax on store purchases, saving them another $902 million a year. And while commercial retailers offer shopping alternatives outside most bases, the Department of Defense still would have to spend roughly $881 million a year to run stores overseas and in remote U.S. areas if the current military resale system didn’t exist.

These numbers and many more in the report “Costs and Benefits of the Department of Defense Resale System” strive to capture the full value of exchanges and commissaries, said Steve Rossetti, director of government affairs for the logistics association, which represents manufacturers, suppliers and vendors of goods sold in the military’s resale system.

“Rolling up all of these numbers,” Rossetti said, “there is a $6.20 return to the Department of Defense for every tax dollar invested” in exchanges and commissaries.

“If these programs didn’t exist overseas, we wouldn’t be selling American products to the troops there. They would be buying foreign products,” he said.

The full report is online at www.resaleresearch.org.

Rossetti notes that ideas have been floated to squeeze costs out of military stores or to reduce the $1.4 billion annual subsidy use to run base commissaries. These came from a prominent debt-reduction commission, congressional budget analysts, the Senate Veterans Affairs Committee, at least for a short while, and from Sen. Tom Coburn, R-Okla., an outspoken budget hawk.

Coburn challenged the Defense Commissary Agency’s contention that base stores deliver more than $2 in savings to patrons for every $1 in taxes spent on grocery store operations, saying that figure assumes military patrons wouldn’t shop for bargains the way other Americans do.

“By getting the Department of Defense out of the grocery business here in the United States, Congress could increase military pay across the board and allow military members to shop at the stores of their choice,” Coburn argues in his November report.

Deepening the worry for military shoppers and their champions is the looming threat of budget sequestration on defense programs, including base stores.

Under the president’s plan for handling sequestration, commissaries would see taxpayer support cut by about 10 percent in fiscal 2013.

Exchanges, unlike commissaries, earn profits, which then are used to fund base morale, welfare and recreation programs. Sequestration would crimp base operations and maintenance dollars, impacting transportation support to exchanges and morale, welfare and recreation programs.

“We agree that all defense programs should share in the effort to reduce costs,” Rossetti said. But “resale programs have done that already, cutting billions of dollars in operating costs through efficiency initiatives.”.

To comment write Military Update, P.O. Box 231111, Centreville, VA, email milupdate@aol.com or twitter: Tom Philpott @Military_Update.