Some Commissary Price Increases Likely Next Year: Lawmaker

Congress will seek to raise commissary prices while lowering others under a “variable pricing” plan as part of upcoming 2017 legislation governing the Defense Department, one lawmaker told Military.com.

"I do expect there to be additional commissary provisions within the National Defense Authorization Act, some of which are to give the Defense Commissary Agency the authorities and flexibility they need to move forward with some of the things they've already said they would like to do," Rep. Joe Heck, R-Nevada, who oversees the House Armed Services subcommittee on personnel, which sets commissary legislation, told Military.com in a recent interview.

"We think we've got to move the variable pricing," he added.

Under current law the Defense Commissary Agency sells goods at-cost, plus a 1-percent price bump to cover loss and spoilage and a 5-percent surcharge on shoppers' final bill. An ongoing push by Congress, however, looks to institute "variable pricing," a move that would allow commissary officials to raise or lower prices regardless of what those items cost the system. 

Since store sales only cover the cost of goods, the commissary currently receives $1.3 billion a year in taxpayer funding, which largely pays for employee costs and store operations worldwide. Lawmakers and the Pentagon have sought for several years to cut that funding and move the commissary to a self-sustaining model, but advocates warn that raising prices to pay for the system's operation will drive away customers and eliminate the benefit, seen by many as a non-monetary form of military pay.

While a variety of price-setting schemes have been floated, Heck said he expects a push for a rule that would set commissary prices on a region-by-region basis. That plan would set prices at a yet to be determined percentage below the regional average of goods outside the gate. For example, if a gallon of milk costs an average $2.50 in civilian stores in the Washington, D.C., area and the commissary were to set all prices at 15 percent below local averages, that milk at the commissary would cost $2.12. 

But coming up with what that average savings over the civilian marketplace should be is likely to be a sticking point. Heck said that any savings number has to be above the breakpoint where shoppers will no longer bother making a trip to the commissary.

"We know that there's a break point, we know that if the savings is less than 'X' people will say 'well I'll just go to the Walmart superstore,'" he said.  "So we want to make sure that the savings is adequate to allow the commissary shopper to remain a commissary shopper so they see it as a valued benefit."

As part of that process lawmakers have asked the commissary to produce a "market basket" of products that could be compared in each region against prices outside the gate. But military family advocates and industry representatives say there are major problems with that plan, including determining what products should be compared, how often a survey should be done and what kinds of stores should be included in the comparison.

Military family advocates also warn that unless such a change is paired with increased cost of living allowances, a bump lawmakers are unlikely to give, families stationed in high-cost regions will be paying more out of pocket for groceries and, in effect, be punished for going where the military sends them. And no data has shown that such a model would actually result in savings.

"It puts at a disadvantage families living in locations where already they are dealing with a high cost of living," said Eileen Huck, a deputy government relations director at the National Military Family Association. "I haven't seen numbers that demonstrate how adopting this model would make the commissary more efficient and allow it to operate at a lower appropriation."

Clarification: This story was updated to clarify that prices for commissary items can both increase and decrease under a variable pricing model, depending on demand.

-- Amy Bushatz can be reached at amy.bushatz@military.com. Follow her on Twitter at @amybushatz.