Government Shutdown?

We’re about three weeks away from October 1, the beginning of the government’s fiscal year and the start of what’s become an annual ritual…a threatened shutdown of the government.

Any shutdown has a major effect on commissaires (which have most of their expenses paid by appropriations) and a lesser effect on exchanges (because they are largely funded though patron proceeds).   And, a shutdown would be particularly disastrous for commissary operations and suppliers which are already coping with major convulsions due to pandemic-forced base access restrictions.

Bottom line up front: the most likely outcome (80 percent in my estimation) is a “continuing resolution” or CR, that is, a bridge from one funding bill to another and continued uninterrupted operation of the stores.  Regular appropriations bills are very unlikely because of the hyper partisanship, supercharged by the upcoming election.  And, no one really wants to add to the Nation’s pandemic misery by throwing another 850,000 or so Federal workers out of work.

Under a CR, commissaries would be funded at the FY 2020 (October 1, 2019-October 1, 2020) levels that are more than adequate to sustain operations, especially since commissaries got a $34 million funding boost in the first pandemic relief bill (CARES I).

Treasury Secretary Steven Mnuchin and Speaker of the House Nancy Pelosi have agreed to work on a CR and Mnuchin said that the CR would carry the funding beyond the election.  If this is the case, Congress would return for a “lame duck” session to either extend the duration of the CR or pass regular appropriations bills.  (Senator Jim Inhofe told ALA that he didn’t expect the policy bill or the Defense Authorization Act to be considered until after the election.).  Anyway, it appears that both sides want a “clean” CR that would not have any provisions other than funding the government.

Why not give it a 100 percent chance of not shutting down? Well, this is Washington after all, and you never know what kind of last-minute item will be tossed into the game that would derail a CR.

Don’t confuse the CR with another pandemic stimulus bill that is being debated right now.  And, most insiders are saying that it would be mutual suicide to try and hang the CR on any pandemic relief bill.  But then again, this is Washington and it has been a long hot summer.  ALA is working to get funding in the next stimulus bill to offset extraordinary supply chain costs associated with the pandemic and provide funding relief for hard-hit nonappropriated fund Government programs to include DoD and VCS.

So, if there is a small possibility that the Government could shut down.  What does this mean?

A government shut down occurs when funding expires for the government that was provided in previous bills passed by Congress and Congress fails to pass appropriations for the coming year or even a temporary funding measure to bridge from one appropriation to another.

Since the enactment of the US government’s current budget and appropriations process in 1976, there have been a total of 22 funding gaps in the federal budget, ten of which have led to federal employees being furloughed.

There have been three shutdowns in recent years:

 The 2013 shutdown

The worst for the commissary program was in 2013 when the entire government shutdown for 13 days.  ALA went to bat for industry and lobbied the Administration and the DoD to keep commissaries open.  This resulted in commissaries only being closed for only seven of the 13 days, but still enough to cause considerable disruption in commissary operations.  In an October 1, 2013 letter to then Deputy Secretary of Defense Ash Carter, ALA and the Armed Forces Marketing Council said:

 “Industry will work to divert product to minimize this impact, but options are extremely limited due to the abrupt nature of the supply chain disruption, especially as we cannot ascertain the duration of the shutdown.

 “This is uncharted territory for commissaries.  Past shutdowns have allowed these stores to remain open and we expected that this would be the case until we were provided a Notice to Trade that said otherwise.  We urge you to reconsider the decision to close stateside stores altogether.  At the very least, commissary operations should be allowed to continue until such time as we are able to work with the Defense Commissary Agency to mitigate the matter and reduce liability and costs across the entire supply chain.

 “We believe that there will be immediate pressure on in-store inventory and the working capital funds as products begin to spoil and reach their expiration dates.  Further, the precipitous disruption of the supply chain on manufacturers, distributors and brokers who form the supply chain for the commissaries will trigger a number of difficult issues as ownership of inventory in the pipeline raises a host of logistical, administrative and legal matters as products expire with costs estimated in the hundreds of millions of dollars.”

The effort to reopen the stores was aided by another law passed during the heat of the shutdown the “Pay our Military” Act that appropriated funding to pay military personnel in the event of a shutdown and was interpreted by Government lawyers to allow all civilian Defense personnel to return to work as well, on the basis that they “contribute to the morale, well-being, capabilities and readiness of service members.”

The January 2018 shutdown

Another shutdown in January of 2018 had minimal effect because of the short (3 day) duration and practically by the time the stores actually shut down, they opened back up.

 The December 22, 2018 to January 5, 2019 shutdown

The longest shutdown (35 days) over the border wall but appropriations for the DoD had already passed, so DoD and the commissary program dodged the bullet.

 Stabilizing for the future

Because these shutdowns are white-knuckle for commissaries and the supporting industry, ALA has been working to provide some stability.  We worked with our friends in Congress, including Congressman Rob Wittman R-Va.) and Congresswoman Elaine Luria (D-Va.)and got language in the House version of this year’s Defense policy bill (The Fiscal Year 2021 National Defense Authorization Act) to examine creative ways to use bridge financing to keep operations going even in the worst case government shutdown scenario.  The language also calls for an assessment on the well-being of patrons who lost access to their stores.  Here’s the language:

Operation of Commissaries during Period of Expiration of Appropriations

The Committee recognizes that military commissaries provide a reliable source of high-quality food and subsistence for military personnel and their families. The committee further recognizes that disruptions of these operations due to Federal shutdowns prompted by the expiration of appropriations may deprive families of this vital subsistence source at the very time that it is most needed. As substantiated by recent surveys, some military men and women rely upon food stamps, and, as food insecurity was cited as an in- creasing concern by the Committee in the Fiscal Year 2020 National Defense Authorization Bill, it is critically important that the commissaries remain open during government shutdowns. Further, the committee recognizes that due to the perishable nature of products sold, there are major logistical and administrative matters that arise when retail operations at the end of the supply chain precipitously cease to include disruption of logistical synergy between major stateside locations and operations at remote and overseas areas.

Due to the unique nature of these operations, the Committee believes that the Department of Defense should consider including these operations as excepted programs during the period of expiration of appropriations. Additionally, the Committee directs the Secretary of Defense to provide a report to the House Committee on Armed Services by March 15, 2021, that would examine the feasibility of commissaries being provided excepted status. This report should include the advisability and feasibility of continued operations using excess balances in working capital funds to finance continued operations. The report should also examine the feasibility and advisability of using commissary surcharge trust funds or non-appropriated funds generated from implementation of business practices and procedures and validity of commitments to re- plenish or reimburse these sources immediately upon restoration of appropriations by Congress. The report should also examine the financial impact on military men and women and their families losing this benefit during any Federal shutdown.

And, in another bi-partisan show of support in the Senate’s version of the NDAA, supported by Senator Tim Kaine (D-Va.) and Chairman Jim Inhofe (R-Okla.) language was included supportive (but less prescriptive) on keeping commissaries open during government shutdowns.  The language is notable because it specifically calls for commissaries to be “excepted” programs (in other words open) during shutdowns.  Here’s that language:

“Operation of commissaries during government shutdowns

Military commissaries provide a reliable source of high-quality food and subsistence for military servicemembers and their families. During government shutdowns prompted by an expiration of congressional appropriations, commissary closures deprive families of this vital subsistence source. Due to the critical importance of commissaries to military families, the committee believes that the Department of Defense should designate commissary operations as excepted programs during government shutdowns.”

Commissaries, the shutdown and the pandemic

And, the commissary program got added insulation from shutdown effects on an ALA-supported emphasis on commissary pandemic operations when on March 25, 2020 Vee Penrod, Acting Assistant Secretary of Defense and DeCA Director issued a letter saying that commissaries were “mission essential” during the pandemic.  In her memo to the DoD in including the Joint Chiefs of Staff, Penrod said: “Providing for the care and feeding of our military members and families is a critical requirement that must be accomplished at all health protection levels.”  In support of the Department’s response to the COVID-19 pandemic, I am designating all DoD commissaries and operational support facilities as mission critical services and all Defense Commissary Agency (DeCA) store and operational support facility employees as mission critical except when otherwise determined by the installation commander…”  The Secretaries of the Military Departments and geographic combatant commanders should be prepared to support sustainment of commissary operations with assets, if necessary, to maintain critical operations.  In addition, installation commanders should ensure continued installation access for resupply trucks and commissary-related support services.”  The authority excluded non-mission contract services and personnel such as delis, bakeries, sushi stations, flower shops. And seafood stations.

 

Of course, we’ll keep you posted…

 

Best regards,

Stephen Rossetti

President

Posted in .

Leave a Reply

Your email address will not be published. Required fields are marked *