It’s good news, bad news for U.S. military families who save big bucks on their grocery bills thanks to a taxpayer-funded subsidy for their Commissary grocery stores. The good news is, their stores won’t be closing. The bad news is, their savings may evaporate.

That’s the takeaway from the latest Pentagon budget proposal released yesterday. The spending plan for fiscal year 2015 includes a number of controversial cost-saving measures, including base closures, cuts to health care benefits and a major reduction of the $1.4 billion a year in government subsidies provided to the Commissary grocery system.

Over the next three years, the Pentagon proposes slashing the subsidy by more than two-thirds, reducing it to about $400 million. In announcing the plan Monday afternoon, Secretary of Defense Chuck Hagel tried to emphasize the bright side: “We are not shutting down commissaries,” he said. “All commissaries will still get free rent and pay no taxes. They 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. Overseas commissaries and those in remote locations will continue receiving direct subsidies.”

Taking a billion dollars out of the Commissary system would represent a significant savings to taxpayers – but at a potentially significant cost to military families. The subsidy allows the Defense Commissary Agency (DeCA) to sell groceries at cost, plus a 5% surcharge meant to cover the cost of construction and maintenance.

Slashing the subsidy means DeCA will have to get more money from somewhere, to pay for things like employee salaries. The Pentagon budget plan does not make clear whether Commissaries will be authorized to raise their prices above cost, increase the 5% surcharge, or both. The Military Times quotes an unnamed former defense official as saying that Commissary prices would need to rise by an average of 20% to accommodate such a large reduction in the subsidy.

That would wipe out much of the savings that DeCA bragged about just last month. In its annual price comparison survey, DeCA said military families can save more than 30% by shopping at the Commissary. That 30% savings, DeCA says, amounts to more than $2.6 billion a year in savings.

That effectively means that military families could end up spending an additional $2.6 billion a year on their groceries, in order for taxpayers to save $1 billion a year in reduced subsidies.


The good news, if Commissary supporters can call it that, is that the budget plan puts an end to recent speculation that Commissaries might be closed. And the reduced subsidy is better than no subsidy at all, which budget hawks have advocated.

Most notably, U.S. Senator Tom Coburn sparked a fierce debate when he advocated for the elimination of the subsidy in late 2012. In a report, he dismissed DeCA’s 30% savings estimate, saying that figure “appears to assume members of the military would have purchased the same items at full retail price at other commercial grocery stores, rather than comparison shop or otherwise take advantage of any type of lower prices, coupons, frequent shopper programs, or promotions.” And with the exception of those stationed overseas or in a remote domestic location, he said there are plenty of other places for military families to get good deals on groceries without taxpayers having to foot the bill.

“By getting the Department of Defense out of the grocery business here in the United States,” his report read, “Congress could increase military pay across the board and allow military members to shop at the stores of their choice… and still save $9.1 billion over ten years.”

Only thing is, the Pentagon budget plan includes a mere 1% pay raise for service members – not nearly enough to make up for what could be a 20% hike in their grocery bills.

“Our Association continues to stress to policy makers the importance of the commissary savings,” the National Military Family Association said in a statement. “We understand cuts and changes need to be made. But must military families be asked to absorb them while we remain a military at war?”

The Pentagon budget plan still needs to be rolled into President Obama’s overall budget plan, set for release on March 5th. And the whole thing will need to be debated and passed by Congress. So there’s no guarantee all of the Pentagon’s recommendations will be approved. But Hagel called on Congress “to partner with the Department of Defense in making politically difficult choices.”

Groups like The Coalition to Save Our Military Shopping Benefits are already planning letter-writing campaigns to Congress and the President. So the Commissary debate is far from over – instead, it would appear the real debate is just getting started.

Image source: Defense Commissary Agency

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