[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



                         [H.A.S.C. No. 110-150]

                      MILITARY RESALE AND MORALE,

                    WELFARE, AND RECREATION OVERVIEW

                               __________

                                HEARING

                               BEFORE THE

                    MILITARY PERSONNEL SUBCOMMITTEE

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                             APRIL 17, 2008


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




                    MILITARY PERSONNEL SUBCOMMITTEE

                 SUSAN A. DAVIS, California, Chairwoman
VIC SNYDER, Arkansas                 JOHN M. McHUGH, New York
LORETTA SANCHEZ, California          JOHN KLINE, Minnesota
NANCY BOYDA, Kansas                  THELMA DRAKE, Virginia
PATRICK J. MURPHY, Pennsylvania      WALTER B. JONES, North Carolina
CAROL SHEA-PORTER, New Hampshire     JOE WILSON, South Carolina
NIKI TSONGAS, Massachusetts
               Michael Higgins, Professional Staff Member
                 John Chapla, Professional Staff Member
                     Rosellen Kim, Staff Assistant






                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2008

                                                                   Page

Hearing:

Thursday, April 17, 2008, Military Resale and Morale, Welfare, 
  and Recreation Overview........................................     1

Appendix:

Thursday, April 17, 2008.........................................    39
                              ----------                              

                        THURSDAY, APRIL 17, 2008
      MILITARY RESALE AND MORALE, WELFARE, AND RECREATION OVERVIEW
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Davis, Hon. Susan A., a Representative from California, 
  Chairwoman, Military Personnel Subcommittee....................     1
McHugh, Hon. John M., a Representative from New York, Ranking 
  Member, Military Personnel Subcommittee........................     2

                               WITNESSES

Arsht, Leslye A., Deputy Under Secretary of Defense for Military 
  Community and Family Policy....................................     3
Baker, John, Fleet and Family Readiness Program Director, Navy 
  Installations Command..........................................    10
Bianchi, Rear Adm. Robert J., USN, Commander, Navy Exchange 
  Service Command................................................     6
Larsen, Timothy R., Director, Personal and Family Readiness 
  Division, Headquarters, U.S. Marine Corps......................     8
Macdonald, Maj. Gen. John A., USA, Deputy Commanding General, 
  U.S. Army Installation Management Command and Commander, Family 
  and Morale, Welfare and Recreation Command.....................     4
Myers, Arthur J., Director of Services, Headquarters, U.S. Air 
  Force..........................................................    11
Page, Richard S., Acting Director, Defense Commissary Agency.....     9
Thurgood, Brig. Gen. Keith L., USAR, Commander, Army and Air 
  Force Exchange Service.........................................     7

                                APPENDIX

Prepared Statements:

    Arsht, Leslye A..............................................    48
    Baker, John..................................................   158
    Bianchi, Rear Adm. Robert J..................................    95
    Davis, Hon. Susan A..........................................    43
    Larsen, Timothy R............................................   119
    Macdonald, Maj. Gen. John A..................................    79
    McHugh, Hon. John M..........................................    46
    Myers, Arthur J..............................................   172
    Page, Richard S..............................................   141
    Thurgood, Brig. Gen. Keith L.................................   103

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mrs. Drake...................................................   205
    Ms. Tsongas..................................................   205

Questions Submitted by Members Post Hearing:

    Mrs. Davis...................................................   209

 
      MILITARY RESALE AND MORALE, WELFARE, AND RECREATION OVERVIEW

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                           Military Personnel Subcommittee,
                          Washington, DC, Thursday, April 17, 2008.
    The subcommittee met, pursuant to call, at 10:01 a.m., in 
room 2118, Rayburn House Office Building, Hon. Susan A. Davis 
(chairwoman of the subcommittee) presiding.

OPENING STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM 
    CALIFORNIA, CHAIRWOMAN, MILITARY PERSONNEL SUBCOMMITTEE

    Mrs. Davis. Good morning. Good to see you all.
    Today, the subcommittee will turn its attention to military 
resale and morale, welfare and recreation of our MWR programs. 
When service members and their families talk about community 
quality of life, they are referring to the commissaries, to 
exchanges, child development centers, youth centers, libraries, 
gymnasiums, playing fields, parks, golf courses, clubs, 
restaurants, recreation equipment, and hobby shops that are the 
core of the military community.
    Many Americans would consider the package of facilities and 
services that is typical for most installations and declare 
that it is better than what they have in their communities. But 
few would challenge that these community resources are 
inappropriate, because Americans recognize the remarkable 
sacrifices and stress that accompany military life, 
particularly today, given the extreme tempo of our ongoing 
conflicts. Our families need these strong and reliable centers 
in their lives, and our warriors absolutely must be confident 
that their families are well cared for in their absence.
    The programs we will talk about today are a critical part 
of that confidence. In short, the Members of Congress, and 
particularly the members of this subcommittee, are believers. 
While we require no convincing, I worry about the commitment of 
the armed services to sustaining these programs; with the 
exception of child care, the appropriated funding support for 
these programs has not always been so terribly enthusiastic, 
and we seem to be less concerned about the challenge in 
maintaining a caring community environment.
    So I hope that the day does not come when we regret the 
loss of the sense of community in the military because we no 
longer fully appreciate its value as we once did. And you may 
want to respond to that because I think what we are trying to 
see is, how do we--how do we enhance that? How do we see it 
growing in a way that really honors the men and women who 
serve?
    We also have a number of questions concerning the 
management of these programs and the stewardship of the 
nonappropriated dollars that belong to the soldiers, sailors, 
airmen and marines that serve our Nation.
    Before introducing our wonderful panel this morning, I want 
to recognize Mr. McHugh for his opening comments.
    [The prepared statement of Mrs. Davis can be found in the 
Appendix on page 43.]
    Mrs. Davis. Mr. McHugh.

  STATEMENT OF HON. JOHN M. MCHUGH, A REPRESENTATIVE FROM NEW 
     YORK, RANKING MEMBER, MILITARY PERSONNEL SUBCOMMITTEE

    Mr. McHugh. Thank you very much, Madam Chair. I ask that my 
full statement be placed in the record in its entirety.
    And let me just very briefly say that--well, first of all, 
welcome to our distinguished panelists. You may have set a 
committee record for the number of individuals on a panel. As 
the Chair suggested, your number very clearly underscores the 
wide range of the services you provide, and yet it all comes 
back to that one catch-all phrase, ``quality of life.'' And I 
know you recognize in this time of high operations tempo the 
necessity for your product, for the quality of life, that the 
needs of your customers have never been greater. And that is 
our collective goal here, of course, to try to do everything we 
can to ensure that your product goes forward and wherever 
necessary and possible, even enhanced.
    I certainly share the Chair's concern about what seems to 
be, certainly in real dollar terms, a lack of consistent 
commitment of the MWR programs. I think that that is something 
that we are going to want to discuss more fully here today. 
And, as well, of course, we want to hear your perspective--
where you view the greatest challenges, how we can be helpful 
to you as you endeavor to meet those challenges.
    And let me last welcome five of you, particularly. You are 
all welcome, of course. And we are honored to have you. But we 
have five amongst you, this is your first appearance; and I 
know the Chair will be introducing the panel, so I will leave 
it to her to single those folks out. But I wanted to add my 
particular words of appreciation to those new panelists, and we 
will try not to be too heavy handed in our treatment of you.
    So welcome, and we look forward to your comments.
    And, Madam Chair, I yield back.
    [The prepared statement of Mr. McHugh can be found in the 
Appendix on page 46.]
    Mrs. Davis. Thank you, Mr. McHugh.
    I wanted to introduce all of the panel members this 
morning. Ms. Leslye Arsht, who is the Deputy Under Secretary of 
Defense for Military Community and Family Policy; Major General 
John A. Macdonald, United States Army, Deputy Commanding 
General, U.S. Army Installation Management Command, and 
Commander, Family and Morale, Welfare and Recreation Command; 
Rear Admiral Robert Bianchi, U.S. Navy Commander, Navy Exchange 
Service Command; Brigadier General Keith Thurgood, U.S. Air 
Forces, Commander, Army and Air Force Exchange Service; General 
Timothy Larsen, Director of Personal and Family Readiness 
Division, Headquarters U.S. Marine Corps; Mr. Richard Page, 
Acting Director, Defense Commissary Agency; Mr. John Baker, 
Fleet and Family Readiness Program Director, Navy Installations 
Command; and Mr. Arthur J. Myers, Director of Services, 
Headquarters U.S. Air Force.
    Ms. Arsht and Mr. Myers, you are both very familiar, we 
know; and welcome back to you.
    And General Macdonald, as we know, you took a year off, and 
we welcome you back with--and also in a new role and a 
promotion. So congratulations to you.
    And to the rest of you, we welcome you here. I am very 
pleased to have you. The Subcommittee on Military Personnel 
knows how important your positions are; and we are very 
encouraged by your interest and your commitment and we thank 
you very much for being here.
    It is unusual to have almost 100 percent turnover in these 
positions, and so we hope that that will mean that we have 
great new energy; and I am sure that the excellence of all of 
you will certainly be realized as we work toward the goal of 
helping our military families.
    I wanted to ask, and I think you have probably been told, 
we have such a large panel, and you have some wonderful 
statements that you have given to us; if you can reduce your 
comments this morning, though, to three minutes, and your 
introductory statement, I know that we are going to have an 
opportunity to get to many of the issues that you would spend 
more time talking about. But if you could, just focus on the 
key issues that you want us to know about today, this morning, 
and we will have an opportunity to go into far greater depth.
    Thank you very much for being here.
    Ms. Arsht.

STATEMENT OF LESLYE A. ARSHT, DEPUTY UNDER SECRETARY OF DEFENSE 
            FOR MILITARY COMMUNITY AND FAMILY POLICY

    Ms. Arsht. Chairwoman Davis, Representative McHugh, 
distinguished members of the subcommittee, thank you for this 
opportunity.
    Today, you will hear testimony about inspired approaches 
and a renewed spirit of collaboration to deliver meaningful and 
relevant support to our military community members, whether 
they live near or far from an installation. Our resale and MWR 
programs are more effectively reaching out to our active duty, 
Guard and Reserve families, our retirees, the digital 
generation of members and our military spouses who work. We are 
creating a new paradigm made possible through technologies and 
partnerships.
    Working together with the services to implement Base 
Realignment and Closure (BRAC) and restationing, we have made 
great progress to develop uniform guidelines and standards for 
programs to treat our affected employees equitably and assure 
that the facilities costs are borne by appropriated funds.
    In the State of the Union address, the President asked that 
Congress support more child care and education opportunities 
for our military families. With the help of enabling 
legislation, we plan to increase the availability of affordable 
child care by further accelerating on-base construction 
programs and by creating more partnerships for child care in 
the communities outside the gate.
    We are also expanding spouse career and education 
opportunities. There is a renewed commitment by the commissary 
and exchange leadership to work together to better serve the 
customer. Joint sales events exemplify commissary and exchange 
collaboration. These events attract our families from 
surrounding communities, including retirees, to our retail 
complexes on military installations.
    Last year, Defense Commissary Agency (DeCA) initiated 
prototype events at Guard and Reserve locations and plans to 
significantly increase the number of events this year with 
exchange participation.
    We are initiating several MWR programs for our far-flung 
military members and families. Newly purchased library 
databases and electronic and audio books, including animated 
books for children and do-it-yourself guides for home and auto 
repair will be available virtually anywhere through Military 
OneSource and services library portals.
    To expand the MWR benefit for families of deployed Guard 
and Reserve members, we will buy down family memberships to 
fitness and recreation centers in local and communities. For 
deployed members who use the Internet to communicate with 
family and friends, we improved the speed, reliability and 
access to YouTube.com, Facebook.com and other widely used 
websites.
    I thank the Congress, our resale and MWR employees, our 
industry partners for the genuine concern and willingness to 
work together to sustain these essential programs. We will need 
your continued support as we adapt our programs to better serve 
the deployed Guard and Reserve communities and implement the 
President's initiatives for military families.
    Thank you.
    [The prepared statement of Ms. Arsht can be found in the 
Appendix on page 48.]
    Mrs. Davis. Thank you.
    Yes, please go ahead. Who is next, Mr. Macdonald?
    General Macdonald.

     STATEMENT OF MAJ. GEN. JOHN A. MACDONALD, USA, DEPUTY 
 COMMANDING GENERAL, U.S. ARMY INSTALLATION MANAGEMENT COMMAND 
   AND COMMANDER, FAMILY AND MORALE, WELFARE AND RECREATION 
                            COMMAND

    General Macdonald. Madam Chairwoman and members of the 
subcommittee, it is a pleasure to appear before you to discuss 
the progress we have made in adapting Army family and MWR 
programs to meet the challenges and opportunities that are 
transforming our Army. I have submitted my statement for the 
record and have a few brief comments.
    Much of what I have to share with you today is not news. It 
is not news that we continue to maintain MWR professional staff 
in Southwest Asia and the Balkans; or that we maintain 
facilities at 56 sites in Iraq, Afghanistan, Kuwait; or that 65 
civilian MWR professionals have served in areas since 9/11. But 
we do, and they have. What was initially groundbreaking is now 
business as usual; and while not exciting to report the routine 
nature of, it is precisely what makes it good news.
    Mrs. Davis. General, could you pull the mic a little 
closer, please? Is it on?
    Great. Thank you.
    General Macdonald. Deploying soldiers can now be assured of 
a standard level of service in even the most austere 
environments. We continue to improve support in modest and 
important ways: sports and recreation, library and theater-in-
a-box kits remain mainstays of MWR support to deployed 
soldiers.
    But one of our latest and very popular editions is a 
product called a Playaway that we send to troops in Iraq and 
Afghanistan, about the size of an iPod, that comes preloaded 
with an entire audio book, ear buds, extra batteries and a 
lanyard ready to go wherever soldiers are regardless of whether 
they have electricity or not.
    Army support for families is another idea that is not new, 
but the level of support is unprecedented. Your Army now has 
the most dynamic and ambitious program to support families in 
its 233-year history. Our initiatives are too numerous to fully 
discuss here, but I would like to highlight just a few.
    The Army Family Covenant is new and represents a $1.4 
billion commitment this year to provide soldiers and families a 
quality of life corresponding with their voluntary service and 
daily sacrifice. That is a $700 million increase over last 
year.
    Our programs and services must adapt as the Army grows and 
transforms. We are accomplishing that by implementing the 
Family Covenant and other programs of standardized services 
accessibility--quality health care, excellence in schools, and 
expanded spousal education and employment opportunities. The 
Army Integrated Family Support Network connects geographically 
dispersed, all of our National Guard and Reserve soldiers, to 
provide information, tools, resources and capabilities so that 
those families are included in the Army, as well.
    Army Child and Youth Programs remain essential to reduce 
the conflict between soldiers' parental responsibilities and 
unit mission requirements. The special authority to use 
operations and maintenance (O&M) funding to construct child 
development centers granted by the Fiscal Year 2006 National 
Defense Authorization Act (NDAA) and extend it in 2008 has been 
an invaluable complement to military construction (MILCON), and 
we appreciate it. It has been able to serve as a fast track 
intervention to be able to grow our child care capability.
    The Army community covenant will be unveiled today at Fort 
Benning, and is an ability for the Army to improve quality of 
life for soldiers and families both at the current duty 
stations as they transfer from state to state. This is tailored 
at the local level, state level, and is working with governors 
and governments to help us use community capability to support 
our soldiers.
    In conclusion, the Army will continue to invest in our 
centerpiece, our soldiers and the families that support them. 
We are on the right track in moving forward, installations and 
quality of life are better today and will be even better 
tomorrow. With your continued support, the Army will restore 
balance, build the readiness necessary in an era of persistent 
conflict and remain the strength of the Nation.
    I will be happy to answer any questions you may have. Thank 
you very much.
    [The prepared statement of General Macdonald can be found 
in the Appendix on page 79.]
    Mrs. Davis. Thank you.
    Admiral Bianchi.

STATEMENT OF REAR ADM. ROBERT J. BIANCHI, USN, COMMANDER, NAVY 
                    EXCHANGE SERVICE COMMAND

    Admiral Bianchi. Chairwoman Davis and distinguished members 
of the subcommittee, it is my privilege to appear before you 
today, representing Navy exchanges.
    Navy exchange programs exist to provide quality of life 
support to our warfighters. Our role is a vital and enduring 
one. By improving the quality of life of our sailors and taking 
care of their needs, we allow them to focus on their mission 
and ultimately prevail in battle because, at the end of the 
day, that is really what it is all about.
    Exchanges are instrumental in supporting recruitment and 
retention. Navy's quality of life and retention survey of 
enlisted and officer spouses has validated our critical link to 
retention. Navy exchanges ranked among the top five programs 
just behind health care, retirement benefit, housing allowances 
and commissaries.
    We support our warfighters both at sea and ashore. As Navy 
operations evolve around the globe, so does our Navy exchange 
presence. Navy Exchange Service Command (NEXCOM) opened its 
newest store at Camp Lemonier in Djibouti, Africa, last year. 
And in November we opened a new store in Rota, Spain.
    At sea, our ship store program takes care of sailors' 
living needs and provides funding for our float recreation 
programs. And our telecom program helps keep them in touch with 
home.
    We support the families of our warfighters. When their 
loved ones are deployed or they are stationed overseas, our 
exchanges provide more than just a place to shop. They function 
as community hubs.
    Navy exchanges, in conjunction with industry, sponsor 
health and safety awareness programs, celebrity visits and many 
family-focused events.
    During the California wildfires last year, Navy exchanges 
were there as part of Navy disaster recovery, providing lodging 
and comfort items to evacuees.
    Navy family members represent about one-third of our 
worldwide associates. We value their contributions, and our 
continuity of employment programs provide them flexible career 
opportunities.
    We are proud to take an active role in supporting our 
wounded warriors and their families. Our Navy lodges provide 
guest rooms to wounded service members and their loved ones. 
Our telecom program provides free phone cards to the wounded at 
hospitals and aboard United States Naval Ship (USNS) Comfort. 
With our industry partners, we have provided new furniture for 
hospital lounges and Nintendo Wii games for physical therapy 
departments.
    But taking care of our warfighters doesn't stop when they 
retire from active duty. Retirees have earned their privileges, 
and the exchanges play a vital role in fulfilling our Nation's 
commitment to them.
    Delivering quality of life programs is truly a joint 
effort. Together with the Navy MWR, we provide a seamless 
network of support to sailors and their families. We also 
collaborate with Army and Air Force Exchange Service (AAFES), 
Marine Corps Exchange, DeCA and our industry partners to find 
deficiencies and improve our program effectiveness.
    Today's economic environment is affecting everyone. More 
than ever, we are committed to bring savings and value to our 
Navy families.
    We have implemented tools to better understand our patrons 
and meet their ever-changing needs. In short, we want to 
delight our customers. Our 15,000 worldwide associates never 
lose sight of the fact that we exist solely for the dedicated 
patriots and their families who serve or have served our Nation 
and our Navy.
    I take great pride in all that our associates do, and on 
their behalf, I thank all of the members of the subcommittee 
for your continued support and commitment. Thank you.
    [The prepared statement of Admiral Bianchi can be found in 
the Appendix on page 95.]
    Mrs. Davis. Thank you, thank you.
    General Thurgood.

  STATEMENT OF BRIG. GEN. KEITH L. THURGOOD, USAR, COMMANDER, 
              ARMY AND AIR FORCE EXCHANGE SERVICE

    General Thurgood. Madam Chair, Mr. McHugh, members of the 
subcommittee, as you noted, this is my first opportunity to 
appear before you as the Commander of the Army and Air Force 
Exchange Service.
    So I would like to begin by expressing my sincere gratitude 
for your steadfast support in preserving a strong and effective 
exchange benefit for the men and women of the armed forces. And 
I look forward to working with you to ensure that AAFES 
continues to play an important role as a combat multiplier for 
the force and plays a significant role in improving the quality 
of life of our soldiers, our airmen and their families through 
quality products and services, that we give them at a fair 
price, as well as financial contributions to MWR.
    While 2007 was a challenging year for the competitive 
retailers, AAFES continues to demonstrate that it is a strong 
and viable organization with the strategic resilience and 
financial health to compete in the global marketplace.
    AAFES ended 2007 with $8.7 billion in revenue and earnings 
totaling $426 million, which represents a 27 percent increase 
versus fiscal year 2006. And for fiscal year 2007, AAFES will 
contribute over $260 million in dividends to support MWR 
programs. This return represents the second highest dividend 
return to the services since 2002.
    AAFES earnings not only provide dividends for the military 
community, they simultaneously fund its capital reinvestment 
program ensuring AAFES facilities provide shopping environments 
that are world class and a value that is undeniable to the 
military community.
    In 2007, AAFES completed $344 million in capital 
improvements at 57 installations worldwide, providing shoppers 
with 496 new or renovated retail, dining and service 
destinations.
    Our military families deserve and demand the best service. 
Capital improvements are the brick and mortar of our strategy, 
but the foundation of our customer centered strategy is 
listening to, learning from and leveraging our patrons' 
collective input, as well as providing the product selections 
and the categories that they want and expect. So I would like 
to thank you and this committee for taking action to raise the 
cost limits on restricted merchandise.
    I am tremendously proud of the AAFES associates for 
providing the services we deliver to both kinds of heroes--
military and family members. Our 450 volunteer associates are 
working alongside our men and women in uniform, sharing some of 
the same risk, while providing a level of service unmatched in 
the retail industry.
    At home, our AAFES associates are dealing with the impact 
of BRAC, huge deployments and tremendous competition in the 
marketplace. But more importantly, we are doing all of this 
while striving to meet the needs of the military family 
members, and in some cases, our associates are providing this 
critical service while their own children or spouses are 
deployed in harm's way. I am proud to play a role in furthering 
this great legacy of service and value to our military members 
and their families around the globe.
    So on their behalf, I thank each of you and the entire 
House and Armed Services Committee for your continued support, 
and I look forward to answering your questions.
    [The prepared statement of General Thurgood can be found in 
the Appendix on page 103.]
    Mrs. Davis. Thank you.
    General Larsen.

 STATEMENT OF TIMOTHY R. LARSEN, DIRECTOR, PERSONAL AND FAMILY 
      READINESS DIVISION, HEADQUARTERS, U.S. MARINE CORPS

    Mr. Larsen. Thank you very much, Chairwoman Davis, 
Representative McHugh, distinguished subcommittee members. It 
is really my pleasure today to be here, to appear before you 
and discuss the Marine Corps resale and MWR programs.
    In early 2007, the Commandant of the Marine Corps directed 
the Personnel and Family Services Division to assess the 
organizational and support requirements necessary to place 
Marine and family programs on a wartime footing. In the ensuing 
months, we have listened to thousands and thousands of marines 
and family members, conducted critical program assessments, 
benchmarked with other service organizations, developed 
implementation plans and gained the support of the Commandant 
of the Marine Corps and the senior leadership of the Marine 
Corps to begin to implement improvements to Marine and family 
support programs.
    We are now aggressively engaged in the execution of major 
program review and improvements that will refresh and enhance 
the care and services provided to marines and their families.
    Additionally, we have taken actions to address specific 
program and infrastructure shortfalls at Marine Corps remote 
and isolated locations. These actions, coupled with our ongoing 
efforts to improve and brand Marine Corps exchanges, will 
enable the Marine Corps community services to be more 
responsive to marines and their families. They will be 
appropriately resourced. They will focus on meeting the current 
and future needs of the Marine Corps.
    On behalf of the Marine Corps, thank you for your 
unwavering dedication to the marines and their families and 
your steadfast attention to our needs, and I have submitted my 
statement for the record and look forward to your questions. 
Thank you.
    [The prepared statement of Mr. Larsen can be found in the 
Appendix on page 119.]
    Mrs. Davis. Thank you, General Larsen.
    Mr. Page.

    STATEMENT OF RICHARD S. PAGE, ACTING DIRECTOR, DEFENSE 
                       COMMISSARY AGENCY

    Mr. Page. Madam Chair, Representative McHugh and members of 
the subcommittee, it is my pleasure to appear before you to 
provide the update of the Defense Commissary Agency's 
performance of the past year.
    The commissary benefit continues to remain strong, 
providing exceptional savings and service for the men and women 
who proudly serve our great Nation. We had another impressive 
year in 2007, and once again our numbers say it all. Sales 
continue to grow, the cost of delivering the commissary benefit 
both in actual and constant fiscal year 2000 dollars came in 
under budget. Customer service and patron savings levels remain 
steady. Our patrons continue to believe we are doing it right.
    Customers reported that DeCA strengths are perceived 
quality, perceived value, low customer complaints and customer 
loyalty. However, customer savings continue to be the heart of 
the commissary benefit. The savings of 31.9 percent amounts to 
almost $3,000 per year an average family of four saves by 
purchasing their grocery items at their commissary. Of course, 
obtaining this level of savings would not be possible without 
the tremendous support our extended team of partners, 
manufacturers, distributors and brokers provide in the pricing 
and promotion of products.
    For 2008, DeCA has four strategic initiatives: focusing on 
people, supporting the Guard and Reserve, going greener and 
increasing cooperation with the exchanges. We recognize that, 
to be successful, the agency must focus on a comprehensive plan 
that allows us to attract, develop and retain high-performing 
employees by expanding our talent pool. We are particularly 
interested in attracting individuals who have an investment in 
the military services and the commissary, and are targeting a 
variety of sources such as military spouses, wounded warriors 
and disabled veterans, students and U.S. citizens who possess 
retail experience.
    Our Guard and Reserve efforts are twofold outreach, aimed 
at enabling members and their families to discover their 
benefit and expanding their access to provide services to 
Reserve and Guard units that are not located at an installation 
where there is a commissary.
    The initial effort comprises onsite sales at Guard and 
Reserve centers. We have scheduled over 120 of these sales in 
2008, and by 2010, we expect that number to expand to over 400 
onsite sales.
    Our environmentally friendly efforts are on two fronts, 
those that affect our operations and those that affect our 
customers. For example, our recycling program for cardboard and 
plastic wrap netted $3.7 million which went into the surcharge 
coffers in 2007. And customers embraced the reusable cloth 
grocery bags, purchasing over 750,000 of them since their 
introduction at the end of October 2007.
    DeCA and the exchanges have entered a new era where we are 
actively seeking to cooperate and deconflict our programs 
whenever the opportunity arises. Recognizing the value of 
cooperation versus competition, the cooperative spirit between 
commissaries and exchanges has never been higher.
    In closing, the Administration and operation of the 
commissary benefit has never been stronger. We recognize that 
commissaries deliver a highly valued component of military 
compensation, and they bring a morale-building taste of home, 
feeling of providing familiar American food products in 
overseas locations where such products are often unavailable.
    The employees of DeCA are proud to serve the most deserving 
customers in the world, and we are particularly privileged to 
be entrusted with helping care for the welfare of the families 
of those who are serving in harm's way.
    I will be happy to answer any questions you may have.
    [The prepared statement of Mr. Page can be found in the 
Appendix on page 141.]
    Mrs. Davis. Thank you, Mr. Page.
    Mr. Baker.

  STATEMENT OF JOHN BAKER, FLEET AND FAMILY READINESS PROGRAM 
              DIRECTOR, NAVY INSTALLATIONS COMMAND

    Mr. Baker. Madam Chairman and members of the subcommittee, 
thank you for the opportunity to appear today to discuss Navy 
MWR programs. I have submitted a written statement for the 
record, but would like to mention a few initiatives before 
taking your questions.
    Navy MWR professionals around the world continue their 
outstanding efforts to help sailors and their families sustain 
morale and readiness wherever they serve. Fiscal year 2007 was 
another successful year.
    Navy MWR continued to provide fitness equipment and 
recreation programs to deployed forces at sea or ashore. We 
distributed more than 20,000 pieces of gear to the fleet, and 
of that distribution, 9,500 were distributed to 110 camps in 
isolated or remote locations around the world to support our 
vital off-duty military opportunities.
    The Navy has also created a fitness-for-life initiative 
that reaches out to improve the health and fitness habits of 
the entire Navy community, including family members, Department 
of Defense (DOD) civilians, senior civilians and retirees. This 
includes a worldwide youth fitness initiative called Fit 
Factor, designed to increase youth interest and awareness and 
the importance of healthy lifestyle choices.
    The Navy MWR MILCON strategy includes $96 million for three 
fitness centers and 76 million for five child care centers, all 
of which were included in the President's 2009 budget request. 
We have also launched an aggressive child care expansion plan 
by adding 4,000 new spaces within the next 18 months. This 
expansion includes construction of new child care centers, 
including 24/7 operations, commercial contracts in child care 
spaces and expanding military-certified home care. Combined 
with these initiatives we will reduce child care waiting time 
less than three months Navy-wide, with the first priority given 
to single military parents.
    To assist parents and children with challenges of frequent 
deployment, an additional 100,000 hours of respite care is 
being provided for families of deployed service members. This 
type of care is critical to families who may not have needed 
child care in the past, but now rely on this interim support.
    The Navy continues its investment in nonappropriated fund 
construction projects totaling $65 million in 2007, which 
greatly improves the quality of our MWR facilities. We intend 
to sustain this level of support for the near future.
    MWR continues to make a difference every day as we pursue 
investments in modern and popular recreational programs to meet 
the customer demands of the Navy personnel and their families. 
This investment will especially ensure a strong and healthy 
force for the Navy of the future.
    Thank you for your time and ongoing support for Navy MWR. I 
look forward to working with you to continue to improve this 
vital program, and I am standing by to address your questions.
    [The prepared statement of Mr. Baker can be found in the 
Appendix on page 158.]
    Mrs. Davis. Thank you, Mr. Baker.
    Mr. Myers.

      STATEMENT OF ARTHUR J. MYERS, DIRECTOR OF SERVICES, 
                  HEADQUARTERS, U.S. AIR FORCE

    Mr. Myers. Madam Chairwoman, Representative McHugh and 
distinguished members of the Military Personnel Subcommittee, 
thank you for this opportunity to talk to you about our Air 
Force MWR programs. Let me begin by thanking you for the 
tremendous support you have provided for the men and women of 
our Armed Forces and their families.
    Our MWR programs sustain the Air Force mission and create a 
culture of community support for all airmen and their families. 
We proudly maintain the Air Force's number one weapon, our 
airmen.
    Our efforts tie directly to Air Force success and combatant 
arenas and on the home front. 2005 base realignment closure 
legislation drove us to examine our programs closely, 
especially at the 10 locations where our Air Force programs 
will be integrated into a joint base configuration.
    We have been fully engaged in developing the common 
standards for use at these bases. The quality of life of our 
military personnel and their families should not be degraded. 
We should maintain the highest possible standard for MWR 
programs and, most importantly, fund them to those turnarounds 
regardless of who operates the base where they are located.
    We appreciate the subcommittee's historical emphasis on the 
proper sources for realignment and closing costs and trust that 
your continued vigilance will protect the service members in 
the future.
    As our partner in taking care of our military personnel and 
their families, I must salute my fellow witness, the new AAFES 
Commander, Brigadier General Thurgood. General Thurgood brings 
a wealth of knowledge and experience from the civilian industry 
and is providing outstanding leadership and support.
    Their chief operating officer, Mr. Mike Howard, has a clear 
vision and unwavering focus that are successfully getting 
store-level management back to basics. Their combined efforts 
are providing a further shift and focus throughout the 
organization and are showing up as earnings and dividends 
continue to increase.
    I have worked with many AAFES executive commanders over the 
years, but this leadership is undoubtedly the best.
    I also need to thank Office of the Secretary of Defense 
(OSD) and this subcommittee for their continued support to grow 
child care spaces. In particular, Ms. Jane Burke at OSD was 
instrumental in obtaining emergency intervention funding in the 
last three years. Between these funds and the subcommittee's 
support for extending the expanded minor military construction 
authority through fiscal year 2009, the men and women of the 
Air Force will gain 2,400 additional child care spaces, all but 
three of them are in permanent facilities.
    Thanks again to both of you for taking care of our families 
like this. I am extremely proud of our Air Force services 
personnel and the around-the-clock unselfish dedication to 
airmen and their families in every environment, from home 
station to contingencies in deployed locations. Our team could 
not do this without the support we get from the Military 
Personnel Subcommittee. Thank you for joining us in this 
critically important effort.
    I will look forward to working with you in the future and 
welcome any questions you may have.
    [The prepared statement of Mr. Myers can be found in the 
Appendix on page 172.]
    Mrs. Davis. Thank you very much.
    And thank you to all of you. You kept within that very 
short time limit well, and that will give us some time to 
really ask a number of questions. I hope we have a good 
discussion.
    Members, I think we are going to try to stick to our five 
minutes and probably have a few rounds here. As you know, there 
are a number of events occurring, a very special one this 
morning. With the papal mass this morning, we have members who 
are attending that, and they are also at some other commitments 
that they have.
    Let me start by looking at the appropriate funding support 
for our MWR programs; and clearly, there have been some great 
gains in areas--particularly in child care, I think, and we 
want to commend those of you who have worked in that area.
    But as we look at the funding support as a percentage of 
total expense and we look at the last number of years, in 
fiscal year 2003, we actually were spending more than in fiscal 
year 2007, when we adjust for inflation.
    So I wanted to ask you first, Ms. Arsht, given that figure 
that the Army, Navy and Air Force have spent less on our MWR 
programs during fiscal year 2007, what future does that suggest 
for the military community? Are we, in fact, having some 
slippage there?
    And if I may, I will go on and ask a few other questions 
and then we will come back to you.
    General Larsen, we know that the Marine Corps has actually 
had a fairly consistent approach to this funding, and we know 
there is a management philosophy that has tried to keep it that 
way. And I just wondered if you could tell us more about what 
accounts for that consistency within the Marine Corps.
    General Macdonald and General Larsen, Mr. Myers and Mr. 
Baker, should we be concerned that there seems to be--if we 
just look at these numbers, if we look at the appropriated 
funds as a percentage of total expenses, is that a concern that 
you think the Congress should be focusing on and how can we be 
more helpful?
    Ms. Arsht.
    Ms. Arsht. I think that it is true that there have been 
some small decreases, if you include inflation over this year 
span that you have looked at. But we are pleased that the 
fiscal year 2009 budget has a 20 percent increase; and I think 
that you have already heard, in the opening remarks, that there 
are longer-term plans.
    So I think that each of the services should speak to their 
individual plans.
    Mrs. Davis. Okay. Do you want to go ahead, General 
Macdonald, and talk to us about that?
    General Macdonald. I would love to, ma'am.
    Like I said in my opening remarks, Secretary Geren and 
Chief of Staff of the Army Casey have made a huge commitment to 
Army families to the tune of an increase of $700 million this 
year. They have moved, and as we put the next budget together, 
we are going to do that again and put it in the base, as 
opposed to just in supplemental or in moving year-of-execution 
dollars over.
    So the actual execution dollars in a number of programs, 
which are represented by the Army Family Covenant, and their 
statement and signature around the world that says that they 
are committed to families just like families are committed to 
soldiers, I think is expressed in the number of dollars that we 
have expended in 2008, and we look to have in the budget in 
2009.
    Mrs. Davis. What concerns me about that is, because we are 
talking about shifting, what we see as a supplemental, into the 
base budget, that there will be a lot more demands on those 
dollars.
    What kind--is there more flexibility that is required to be 
able to speak on behalf of the needs of the military community 
as it relates to your issues?
    General Macdonald. Let me try to answer your question this 
way.
    When General Casey became the Chief and went around and 
talked to families and soldiers, they really said, ``We don't 
need any different programs, we just need you to fund the ones 
we have.'' They are all very good--child care, Army community 
service, relocation capability, respite care, all of the 
programs we have in place. We just needed the money to do them.
    So we haven't seen an increase in requirement, with one 
exception, and that is an outreach to our survivors, surviving 
spouses and children, and we are putting in a much more robust 
program to outreach to them, to push information to them, as 
opposed to having them pull it from us.
    That has really been the only increasing requirement that 
we have seen. So we are just funding the programs that we had.
    Mrs. Davis. My time is going to be up in a second.
    But General Larsen, could you speak to the Marine Corps 
quickly?
    Mr. Larsen. Yes, ma'am.
    The Marine Corps has been on a consistent ramp-up from 
about fiscal year 1996, so we have achieved the standards that 
have been set for funding those programs by OSD and for 
Category A and Category B programs, and we are there. We have 
also--we are committed to sustaining that level of funding for 
those programs.
    Additionally, the Commandant of the Marine Corps in the 
past year has reemphasized the importance of those programs and 
provided the support to marines and their families, so we have 
gone out and refreshed many of those programs. Initially, he 
has--he has committed to funding them for the Marine Corps, and 
we are having an increase to our funding within the Personnel 
and Family Readiness Division.
    And we will also--I believe there is some--it is not being 
taken away from other programs. There is some top line increase 
for those programs. And additionally, we have a significant 
increase in the funding in fiscal year 2008 and fiscal year 
2009--that is through supplemental funding, but also in the 
Program Objective Memorandum (POM) 10 and beyond. Those costs, 
those requirements are in our baseline funding.
    Mrs. Davis. Okay. I think we will probably come back to 
this and have an opportunity to have all of you state your 
opinions about that.
    Part of the difficulty, of course, is that we see we have 
minimum standards that we are looking at; and part of the 
question is, should even those be raised? I mean, should we be 
looking at those differently and would that be helpful to you?
    I am going to go on.
    Mr. McHugh, do you want to----
    Mr. McHugh. Yeah. We are going to come back to it right 
now, Madam Chair. I think the Chair was being very kind and 
very gracious.
    We have had enormous erosion, with all due respect, Madam 
Secretary, a total throughout the services of that time of 
200.2 percent when adjusted for real dollars, inflated dollars. 
The Army is 45.5 percent, the Navy 109.4, the Air Force, 67.1; 
the Marine Corps is the sole exception.
    But those are big losses. I mean, we have to be honest 
about it. And I think it is important for us to understand the 
real-world impact of those losses.
    Now, I recognize you good folks at the table today don't do 
budget, you deal with them; and I am not trying to cast blame 
upon you for the circumstances that you have been handed. But I 
would ask you--tell me a bit about, over that time--we are 
talking 2003 through 2007 inclusive, five years--which programs 
were most at risk? What services did you have to cut?
    We have got five new folks here, so maybe you can speak 
anecdotally. But we have got some veterans, folks that have 
been through this. There has to have been some real-world 
impact.
    Secretary Dominguez was here last year and said it was his 
intention to support the ongoing MWR efforts with, roughly 
stated, ``increased emphasis, but the same dollars.'' Sadly, he 
was a man of his word. I find it hard to believe we haven't had 
to have cutbacks in programs--fewer clean towels, whatever it 
is.
    What kind of challenges have these real-dollar--adjusted 
for inflation, but real-dollar erosions had on your efforts? 
And anybody who has got the courage to answer first, I will 
listen to whoever steps forward.
    Mr. Myers. I will step forward.
    Mr. McHugh. Thank you, Mr. Myers.
    Mr. Myers. At the Air Force, we have had significant budget 
cuts. We have seen our programs reduced across the board, at 
every one of our libraries, services have been reduced. We have 
seen in our other programs--and it is all a funding issue.
    We have recently had a problem where we needed additional 
positions for child care and funding for equipment and 
supplies. We finally got it approved to be funded in 2009 and 
2010.
    However, Dr. Snyder brought up an issue that wasn't related 
to that. But because he brought up the issue, we got that 
funding now. So we thank the committee for their support.
    But the Air Force is getting smaller, and it is a budget 
issue. We have to fight for all of our requirements and we are 
seeing our programs reduced dramatically. And the word we are 
getting from the field, the airmen are seeing in the Air Force 
that their quality of life is being eroded.
    Mr. McHugh. Anybody else?
    Well, let me say, Admiral, were you going to--no, you 
weren't. See, I told you I would be easy on you. It is your 
first time, and I tried to do that to you. I apologize. I am a 
lousy poker player, too. I thought you had a tell there.
    Anecdotally, we have heard it across the services. Look, we 
all travel. Most of us have at least one, some have more than 
one base in their district, and we hear from the folks we meet 
on the street. Shorter hours in the gym program, et cetera, et 
cetera.
    The point of this is--and I will readily acknowledge the 
commitment of Secretary Geren and others--in singling out the 
Army, but across the board, we are hopeful that we are seeing a 
turnaround in that. But there will be a new era and we will 
regularize this budget process.
    There will not be a continued blessing, if you will, of 
supplementals. And while I admire budgetary creativity, there 
is a big difference between moving money around and providing 
the money in a base budget and this is a critical oversight 
function of this subcommittee.
    And we would be very remiss--Madam Secretary and the good 
folks who support these programs, I would say to you, if we 
didn't make it very clear, that this is a very, very troubling 
and, sadly, long-term, continuing problem.
    I have heard much over the years about outyears. I have 
kidded in the past. I will state again that I pray every night 
when I go to bed, the good Lord will allow me to live just one 
day before I die in an outyear because everything is going to 
be wonderful.
    But I have been here nearly 16 years, and I have yet to see 
an outyear as predicted it would be. So let us see our first 
one next year--certainly, real soon.
    I have got a number of other questions. That was more of a 
lecture than a question, Madam Chair. But I felt it was 
important to say.
    So I would yield back and look forward to the future 
rounds.
    Mrs. Davis. Thank you, Mr. McHugh.
    Mr. Kline.
    Mr. Kline. Thank you, Madam Chair.
    Thank you all for being here today.
    I hate to break this to you, Mr. McHugh, but you will never 
see an outyear. No, it is never going to happen. I remember in 
the long-distant past, when I was a program development officer 
for the Marine Corps--of course, when you are building, you 
love outyears because everything gets well in the outyear. Of 
course, when those outyears turn into budget years, it is not 
the case.
    And I identify with yours and the chairwoman's remarks on 
another subject where times are changing and, apparently, 
changing for the better. A couple of you mentioned the Military 
OneSource Program. I have had the opportunity to view, tour and 
talk to some of the people that operate that; and I am struck 
by the breadth and depth of the things we are covering now--the 
questions that get answers, the services that get provided--and 
so I am just sort of throwing it out to any of you who would 
like to talk about that. Because I am interested to see how all 
of the services are going to, and are integrating into that.
    But I just think it is tremendous when you have a spouse 
back here, a husband or wife is deployed, a problem comes up, 
they have one place to call and they get the answer. I have 
been very, very impressed with it.
    So does anybody want to amplify on how that is working or 
how you are working together? I would like to hear from you.
    General Macdonald. If I could, sir, we are thrilled with 
it. Frankly, as you know, it started as Army OneSource, and 
then we had some Office of Personnel Management (OPM)--that is, 
other people's money--and OSD took that on. And it has been a 
tremendous program for our geographically dispersed, or for our 
families that are right on a post--that are just off post or on 
post.
    That it has 140 languages that you can call in and get a 
translation instantaneously, helps our young Korean spouses and 
our ones from the Philippines and the ones that have 
immigrated, our Spanish-speaking.
    It continues to grow in capability, most recently with 
addictive behavior counseling that is on line and on the phone. 
We advertise it everywhere. I go out and talk to all the brand-
new precommand courses with colonels and lieutenant colonels; 
and I talk about it every time I go as a tremendous resource 
that I wish I had had when I was a battalion and brigade 
commander. So, a great resource, sir.
    Mr. Kline. Anybody else want to----
    Mr. Larsen. Sir, I would just like to comment. If I could. 
I use Military OneSource, so I know it works.
    As I was coming back from Japan here a few months ago, 
Permanent Change of Station (PCS) and back, as I retired, my 
wife had a number of questions about the area. I got on line 
and I contacted Military OneSource, gave them a whole series of 
questions we had, and they responded very quickly.
    So this is a great asset, and it has got great potential, 
particularly for remote and isolated locations. The independent 
duty recruiter, Reserve people that are not connected directly 
to a base often have an opportunity to get the services they 
need, and we have had several thousand face-to-face counseling 
sessions that have gone on at the recommendation of Military 
OneSource to our people in the field who have contacted them.
    Ms. Arsht. I do want to say--and, General, forgive me for a 
second.
    This is a program that we continue to make more robust. We 
are constantly adding services to it because we think this 
discussion about how we are serving the volunteer force, both 
on installation, off installation, and around the world, needs 
technology to help us drive our responses. So Military 
OneSource is sort of the lead asset that we have to be able to 
bring lots of services together and to be able to deliver them 
efficiently.
    Mr. Kline. It seems to me--General, I think you were going 
to say something. But it is more than just technology; there 
are people behind this.
    And I know, General Larsen, you were talking about coming 
back. As I understand it, if you are being transferred 
someplace, you can call up OneSource and say, where are the 
schools, what are the schools, where are the child care 
centers, what does the housing market look like and all those 
things, and get the kind of help that in the old days we simply 
didn't have.
    So it should be having an impact on the quality of life in 
every service, and I hope that it is.
    And, General, was that a ``tell,'' as Mr. McHugh said?
    General Thurgood. Yes, sir, it was. Just to highlight, 
again, an anecdote.
    As my wife has worked with our families and family support 
groups specifically on the Reserve side, there are real-life 
tangible benefits, physical benefits. We had a family, a wife--
her husband was deployed. She needed a refrigerator or an oven; 
I can't remember which one it was. But she went through 
OneSource, and through OneSource they had contacts from our 
industry partners, and they delivered a stove to that family 
free of charge. So it is a great resource.
    And as General Macdonald mentioned, it is particularly 
important to our family members, reservist and National Guard 
who are away from our facilities in robust support groups, by 
themselves.
    Mr. Kline. It is a new thing to me, and we always think of 
MWR and quality of life as commissaries and exchanges and so 
forth. This is something new. And I am struck with the enormous 
potential--not just potential, but it is actually delivering 
right now, in your example, a stove.
    I see my time is up. Thank you, Madam Chair.
    Mrs. Davis. Thank you.
    Ms. Drake.
    Mrs. Drake. Thank you, Madam Chairwoman.
    And thank you all for being here today. I am sure you are 
all aware of Representative Filner's bill about allowing 
disabled veterans, service-related disability of 30 percent or 
more, being able to use our commissaries and exchanges. So I 
just wanted to hear from you if you think you can absorb that 
extra flow of people or if you see anything that would be a 
problem with that bill?
    Who wants to start?
    Ms. Arsht. The Department has generally tried to protect 
the current eligibility looking at this benefit as a very 
important non-monetary compensation attribute for our active 
force and our 100 percent disabled.
    We have--the most recent information we actually have on 
the scale of the size of that change is a VA study that was 
done in 2000 that said there were 600,000 service members in 
the 30-to-90-percent-disabled category. And then, if you took 
the dependents of those disabled, you take that population, 
they do not have base-access I.D. cards. So that is a component 
of the decision-making around that bill.
    We have not taken a position on the bill, but that would be 
one of the considerations that we would have to take into 
account.
    Mrs. Drake. I wonder--like, Admiral Bianchi--if you have 
thought about, could the store absorb the extra people? I 
understand the policy decision, but I am just wondering about 
physically in the store, whether people make a decision at 
certain times to go because they know they are less busy at 
those times, or if you have actually looked at that issue, 
where you are waiting to see if Congress acts on that bill or 
not?
    Admiral Bianchi. Ma'am, we believe we could absorb the 
extra patronage. The issue is kind of the holistic issue of the 
credentialing and all the other issues that would have to go 
along with it.
    But as far as footsteps in the door and the capacity of our 
infrastructure, we believe we could absorb the impact of that 
decision.
    Mrs. Drake. And I agree. A huge issue is how they verify 
who they are, and for commissaries and exchanges that are 
located on a base, how you get them on the base.
    And then the big question in my mind is, what is the 
appropriate percentage? Is it 30 percent? Is it 50? Is it 100--
to look at that issue.
    Admiral Bianchi. Right now, we base it all on Defense 
Enrollment Eligibility Reporting System (DEERS), so that would 
entail them being registered through the DEERS program somehow 
or coming up with some other enrollment process to validate 
their eligibility.
    But if it worked, we could certainly absorb the after 
traffic.
    Mrs. Drake. I have actually had this discussion with a 
group of veterans, kind of an advisory group that we have. A 
lot of retired military are in that advisory group in the 
district. They actually were very supportive of it.
    Their question was, what is the proper number; is it 30 or 
is it 50? So that was the way they looked at it.
    And I am curious if there has been any sort of survey of 
active duty military of how they would look at that. Have we 
gotten to that point or not of getting feedback from active 
duty military?
    Ms. Arsht. I don't believe there have been any studies of 
active duty, but I will be glad to take that for the record.
    [The information referred to can be found in the Appendix 
on page 205.]
    Mrs. Drake. Thank you very much for that.
    And, did--oh, Madam Chairman, I see my time is about 
expired, and I know we will go back around. Thank you. Thank 
you very much.
    Mrs. Davis. Thank you.
    Ms. Tsongas.
    Ms. Tsongas. Good morning. It is good to be here.
    What you don't know is that I am the product of the 
military. I spent all but three years of my education in 
military schools, I lived on bases across this country and 
around the world. And as I hear about library, I remember, 
well, at Langley Air Force Base being first introduced to the 
world of books.
    I remember well the role the commissary played in my 
family's life and, living in Japan, how important it was to 
have an exchange there because it was our only access to 
American goods. And my first job happened to be in the produce 
department of the commissary in Japan where I reported to a 
very kindly Japanese man.
    So I have this sense of what you all are talking about, 
though quite a few years ago.
    What has changed, though, is our emphasis on child care. 
That is a new world that we all live in, and I commend you for 
the great work you are doing to really respond to the needs in 
the various services. The question that I have, though, is 
how--given the great run-up on this and the aggressive efforts 
you are making, how you are doing in attracting qualified 
personnel, what the challenges are and just to hear your 
feedback on some of those issues.
    Maybe we will begin with you, General Macdonald.
    General Macdonald. Thank you very much.
    We have a multipronged capability for child care. We are 
going to build 91 child development centers from 2008 to 2013. 
But they don't do any good unless you have people in them, as 
you well know. We have a program where we bring young college 
interns over to Europe to help us through the summer, and they 
run camps and also work in our child care centers. We try to 
align that with when brigades are coming back, because many of 
our child caregivers are family members and they want to be 
with their soldier when they come back. So we align that sine 
curve, if you will, of intensity with a population that is very 
mobile.
    We continue to--in this most recent budget proposal, we are 
looking to raise the wages of the folks that were to attract 
the right folks. Frankly, we are in competition with the Post 
Exchange (PX) and the commissary to get quality child 
caregivers when there are family members and folks that live in 
the community. So we need to stay abreast of that capability; 
and we have all talked about not outpacing each other in that 
capacity.
    As you know, we are accredited in almost all of our child 
development centers, and that is individuals that are 
accredited, not just buildings. So we think we have a quality 
child care workforce that provides a very high quality of child 
care.
    Ms. Tsongas. Do you have any guesstimate of how short you 
are running on numbers of personnel that you need?
    General Macdonald. I know we have a couple of places that 
are short. Vilshofen in Germany, in particular, we have a tough 
time. We have a couple of others that are remote sites. Fort 
Irwin in California has a tough time to travel that 47 miles up 
the road every day to get to Fort Irwin.
    But, really, it is specific locations, and in those we have 
raised the wages to attract the workforce that we want.
    Ms. Tsongas. Would General Larsen like to comment?
    Mr. Larsen. Yes, ma'am.
    We have a variety of methods that we use to deliver the 
child care on our installations. We have right now, I believe, 
29 child development centers across the Marine Corps; to get to 
the 80 percent standard that has been established, that would 
require that we build another--about 16 more to meet that need 
for the child development centers. If we do that, then there is 
obviously going to be a staffing issue that we have to deal 
with in some of these locations.
    But, currently, we haven't had a problem. We have--we have 
been able to staff the facilities that we have. There are some 
other options that we also participate in to make sure that we 
can provide that care. We have family care in the home, which 
is not a traditional child development center, but we do it, we 
provide that in other ways.
    We also in places like Bridgeport, California, this past 
year, started--they had a requirement for child care. It is a 
very isolated location, so we have an in-home care system that 
we set up. What we did is, we went to the public-private 
venture (PPV) people that owned the housing and we leased back 
some of the housing units and turned them into a facility that 
we now use for child care; and we are taking care of about 84 
to 86 children in that area which, prior to that, had no access 
to child care. So there are a variety of things that we are 
doing to try to meet that need.
    Ms. Tsongas. I gather there was a mention of moving to 24-
hour childcare across the services. What are the challenges.
    Mr. Larsen. Well, for the Marine Corps, we are providing 
24-hour/7-day-a-week childcare in some locations across the 
Marine Corps.
    A couple of challenges associated with that is we provide 
that care in the family home-care setting. We do not provide it 
in the Child Development Center (CDC) because, in many 
locations, in different states, there are regulations that 
prevent us from operating childcare for more than 12 hours, so 
that 24-hour care becomes an issue, and so we do that in other 
ways to meet that need.
    Ms. Tsongas. Thank you.
    Mrs. Davis. Thank you.
    Dr. Snyder.
    Dr. Snyder. Thank you, Madam Chairman. I am sorry I was 
late in getting here. I want to continue this discussion that 
Ms. Tsongas started.
    Mr. Myers, you and I share a great concern about the 
childcare centers. There are a number of centers in the Air 
Force, and I very much appreciate your advocacy.
    The Air Force, I think, has fallen a little bit behind some 
of the other services just because of some of the budgetary 
issues. Would you give me an update on how you think the Air 
Force is going to get out of their backlog of the need for 
additional childcare spaces, centers?
    Mr. Myers. Several years ago, our backlog was around 6,400 
spaces, but through OSD and this emergency intervention 
funding, we got that down to 4,000. Of course, we have expanded 
our family daycare homes and so forth. We do have several 
projects in the POM. However, I also depend on Congress to help 
us with inserts, and they have been very, very good to us and 
have given us inserts for child development centers.
    Dr. Snyder. Is that what we call an earmark? Is that what 
we call an earmark, Mr. Myers?
    Mr. Myers. Yes.
    Dr. Snyder. I think you and I talked yesterday. We do not 
call that ``pork'' when you are referring to a childcare 
center. You refer to it as a ``piglet.'' It is less politically 
hot then when calling it a ``piglet.''
    The issue of childcare centers, like Ms. Tsongas was 
talking about, are even more important at a time of war when 
you have one spouse mobilized. You know, if you cannot rely on 
quality care for your child when you have got your mate 
overseas, life becomes pretty rough. I know there has been some 
discussion about the possibility in the supplementals this year 
of perhaps doing something about childcare centers, 
particularly for the Air Force, because we have gotten behind. 
I talked to Mr. Murtha about that a day or two ago, and I know 
he shares our concerns, and he is a very strong supporter of 
those, but we will see what comes out of that.
    I have to ask my annual or semi-annual question about 
produce.
    Mr. Page, are you the appropriate person to ask there.
    Mr. Page. I am the designated produce peach.
    Dr. Snyder. You are the head peach?
    Mr. Page. Yes, sir. Yes, sir.
    Dr. Snyder. My impression seems to be that it has gotten 
better over the last several years, both in terms of quality 
but also in terms of presentation, which, I think, has positive 
ramifications on overall store sales, but I would like to hear 
how you see it nationwide.
    Mr. Page. Yes, sir.
    We believe it is a tremendous success story. We have now 
completely assumed the produce buying mission worldwide.
    Dr. Snyder. Mr. Page, I need you to pull that microphone in 
front of you a little bit.
    Mr. Page. Is that better?
    Dr. Snyder. Yes.
    Mr. Page. I believe it is a great news story. We have 
successfully taken over the buying mission worldwide for 
produce. When you look at the numbers, they are spectacular. 
Savings are up. Produce quality is up. Customers are buying 
produce at record rates. Our sales are significantly up. For 
us, when customers vote for us at the cash register, in that 
way, they are really responding to what we have done.
    Most importantly, you mentioned presentation. When you look 
at part of the process and part of what we have done with the 
contract in produce, part of that is a significant training 
investment that our business partners have made to help train 
on the merchandising of the product and on the proper handling 
of the product. That all goes into that presentation you 
mentioned earlier. Again, our produce departments are better 
than they have ever been, and our customers are telling us that 
every day.
    Dr. Snyder. What is your quality control on the quality of 
produce? Do you, personally, send people out to spot-check all 
of the produce on a regular basis?
    Mr. Page. Yes, sir, we do. We do checks ourselves, but we 
also--the United States Department of Agriculture (USDA) 
inspects every produce delivery that goes into every commissary 
in the Continental United States. We also have inspectors at 
the backdoor of every commissary as the produce is being 
received. Plus, with the heightened involvement of our partners 
in training our people on the handling of produce, we are 
better able to make sure we are getting the very best produce 
possible.
    Dr. Snyder. My time is about up.
    I think one of the issues has been the quality of stuff 
coming in the door. But I do not care how good it is; if you 
let it sit there for three weeks, it ain't going to be good. It 
is not going to look good. Then somebody goes in and sees that 
bad stuff, and then they think everything in the store is bad.
    Mr. Page. Yes, sir.
    Dr. Snyder. It could be cereal boxes. It does not matter 
what it is. I mean, that is why it becomes so important. Thank 
you.
    I appreciate and thank you, Mr. Myers, for your comments, 
too.
    Thank you, Madam Chair.
    Mrs. Davis. Thank you, Dr. Snyder. Thank you.
    I want to turn to what, in some ways, is a narrower issue 
than much of the support that we are giving our service 
members, but it is one that comes up to us frequently. Those 
are the ASE regulations, the Armed Services Exchange 
regulations. What I understand is that the House and Senate 
perspective on the sale of furniture in our exchanges did not 
necessarily match up with the request to lift all of the 
restrictions imposed by the Congress in these regulations.
    I am wondering, you know, what your thoughts are about that 
and whether you believe that you are using the latitude that 
you do have, particularly that would relate to the area of 
furniture sales and opportunities that there may be to bring in 
more, whether it is catalogs or tent sales, what have you. The 
reason that I think this is a concern is that we know that much 
of the furniture that is bought on the open market ends up 
costing our service members a lot more because they are paying 
higher interest rates. I understand the concern that we have 
for protecting our community stores as well.
    Do you have the latitude that you need in that? What could 
you share with us in terms of the regulations and the impact 
that it has?
    General Thurgood, Admiral Bianchi, Mr. Larsen, who would 
like to----
    Ms. Arsht. Let me say, first, that we are very grateful for 
the lifting of the restrictions that has occurred, and we are 
using that new authority, and we are very pleased with it. We 
do not have plans to ask for a further lifting of the 
restrictions, which at this moment says that we cannot add 
space, additional space, for furniture sales. I think the 
commanders can speak to the rest of the question.
    Mrs. Davis. I think part of the question is, are there some 
creative ways that you have found in which you can respond to 
some of those needs?
    General Thurgood. Again, thank you very much for the work 
that you have already done on lifting some of the restrictions. 
We will continue to leverage those restrictions and to use them 
in the right kind of way because, at the end of the day, what 
we are trying to do is to compete in a global marketplace. Any 
time our hands are tied, there is a chance that our service 
members and our families will not get the value that they 
deserve because of some restrictions that might be in place. So 
we are going to use that--jewelry and all of those kinds of 
things--to make a difference in the lives of our families.
    So thank you very much, and we will move out against those.
    Admiral Bianchi. Yes, ma'am. Thank you as well for the 
relaxation of some of the restrictions.
    I guess the only other thing I would offer right now is 
that the per-piece limit has been raised to $1,100 from $900, 
is the proposal. We believe that will make a difference. We do 
a lot of special orders. So, in terms of having the authority 
to construct space, that is not as critical an issue. I think 
the issue is, can we provide the range of products? What we try 
and do for the sailors and for their families is to offer them 
the special order categories, and we do quite a lot of business 
there. If there were potentially an opportunity to raise the 
price limit again on furniture, that would, perhaps, help. I 
mean, the reality is folks are going to furnish their houses. 
Right now, they are probably going to the Value Citys or to 
other places to buy if we are not authorized to sell the whole 
range of bedroom sets and other kinds of things.
    We think we can do quite a bit right now, and we thank you 
for that. That would be the only other, I think, opportunity 
that might present itself to us.
    Mrs. Davis. Thank you.
    Just turning--I am sorry. Mr. Larsen.
    Mr. Larsen. Can I just make a comment as well?
    You know, the Marine Corps also appreciates the fact that 
you have lifted some of the restrictions or have raised the 
restrictions. We are interested in taking care of the Marines 
and their families, and we are not trying to compete with small 
businesses outside the gate. That is not why we operate the 
exchanges.
    What we are trying to do is to provide a good value for our 
people. As you indicated, what we are trying to do is make sure 
that they are not subject to some of the predatory lending 
practices or high interest rates or other things that may have 
an adverse impact on their financial well-being. So that is 
what we are looking for, to try to take care of those Marines 
and families.
    Mrs. Davis. All right. As you mention that, too, I think, 
obviously, financial literacy is an issue that is very 
important, and there seem to be many ways to embed that within 
MWR and to encourage people to have an opportunity to really 
get counsel and to help them through what is, obviously, a very 
difficult period with families separated.
    Mr. McHugh.
    Mr. McHugh. Thank you, Madam Chair.
    I spent a lot of time lecturing everyone in my opening 
question period about the erosive effects of inflation on 
dedicated MWR dollars. Let me note to myself and others on this 
side of the dais that inflation has an effect on ASE 
restrictions as well. All of us represent communities that have 
those small businesses, and I think we have been and we need to 
continue to be very sensitive to those.
    What I find outside of most gates of most military 
facilities are less of those kinds of small businesses and more 
of the big box stores that are voracious competitors. I say 
that with a great deal of admiration, the strong capitalist 
that I try to be, but I do believe that we have to, as a panel 
here, be extraordinarily sensitive to the needs to keep up with 
inflation and to keep up with that competitive spirit that the 
big box stores bring so that our men and women in uniform can 
have the best possible value, as the Chair said very 
accurately, with the attendant benefits of lower interest rates 
and other kinds of consumer protections. So that is just a 
``me, too'' from me.
    One of the other effects, I think, you folks have when you 
are hard-pressed for dollars is you try to be creative. In 
another life in Congress, I had the opportunity to chair a 
subcommittee that had jurisdiction over the United States 
Postal Service--I always get the good assignments--and they 
tried to be very creative to try to balance some of the funding 
problems they had. They got into some areas that, frankly, they 
should have never ventured into, and it ended up costing them 
more money than they ever brought in in revenues. I think we 
have got to remain vigilant against that.
    You know, almost 30 years ago, the Army Recreational 
Machine Program (ARMP) was created to operate slot machines and 
other such devices in overseas countries, and it has been a 
good moneymaker. About $120 million goes to MWR support. I have 
heard through the proverbial grapevine that ARMP has been 
expanded and is expanding its scope of business activities here 
in the United States and Continental United States (CONUS), 
such things as Wi-Fi and gaming and other kinds of Internet, on 
Army and Air Force bases.
    I was just wondering if you could inform me a little bit 
about what is happening there? Without judging, what kind of 
analysis did you make to decide you should do that in-house 
instead of going to the private sector as we have in other 
programs?
    General Macdonald. Sir, we are expanding the Army 
Recreation Machine Program, and it is on the recreation side 
with Internet capability. There is no money that goes into the 
machines like overseas in our slot machines. We are not 
authorized to do that in the United States, so these are truly 
recreation machines. We are finding young soldiers are enjoying 
that as entertainment. In fact, to make our recreation 
facilities more viable, we are putting four or five different 
kinds of activities--a cyber cafe, a gaming room, a beverage 
store, a beverage bar, food, a bowling alley, and maybe a dance 
facility--because the youngsters will not stay for one thing. 
They are very interested in multiple things. So we have had 
good luck in being able to do that.
    We feel like we are on the leading edge of the gaming 
industry. We have pulled down some of the games. We use our 
young soldiers to find out what we want the most quickly. Right 
now, we are continuing to move forward with how we do that, to 
include some of the Internet capacity on post.
    We are looking at a team with AAFES on the Internet Wi-Fi 
capability on post. That is certainly lucrative in terms of 
dividends back into the MWR and into the AAFES programs.
    Mr. McHugh. I understand that, and I am not trying to 
discourage new sources of revenue, believe me. I am just 
curious--and this is a question. Could you not provide that 
service and that opportunity and reap the benefits without the 
attendant costs and the responsibilities of actually running 
the program? In other words, is this really your core 
competency?
    General Macdonald. We have found from the other Recreation 
Machine Program that we are some of the most efficient at 
running that. We deal with, on the other side, the folks in the 
gaming industry, and we lead some of that industry. We did some 
of the firsts that did not do mechanical pieces to gaming. It 
is all electronic inside a machine, which increases--reduces 
overhead.
    So the answer to the question is, yes, we think we are on 
the lead of some of that industry.
    Mr. McHugh. Well, I do not know if AAFES wants to make some 
comments, but I would just, in closing, as I see my time is up, 
this is something I was unaware of. As I said, we want to make 
sure that you are using your core competency where it is most 
needed. Again, I am not in any way criticizing the search and 
the utilization of new revenue sources, but I do want to take a 
little bit of a careful look at this because I have not had a 
chance to examine it before.
    Mr. Myers, I do not know if you want to comment.
    Mr. Myers. I am not familiar with our charging for that. 
You know, we have Wi-Fi in our activities, which our airmen use 
for free, but I am not aware of any payment or things. I will 
have to come back to you with that.
    Mrs. Davis. Thank you.
    Mrs. Drake.
    Mrs. Drake. Thank you, Madam Chairman.
    Mr. Page, I wanted to ask you about the A-76 studies. It is 
my understanding that you have been directed to identify four 
stores to undergo a study next year. So I wonder if you could 
comment on that and could let us know if you have identified 
the four stores.
    Mr. Page. We are in the initial planning stages in the 
event that we would have to commence studies in 2009, but there 
have been no definite stores identified. We have some internal 
planning documents that we are just, actually, working through. 
Again, come January 2009, based on current guidance, that is 
when we will begin the studies, but there have been no 
decisions.
    Mrs. Drake. It is still possible then that that could be 
withdrawn?
    Mr. Page. They are all just internal planning documents. 
There have been no final decisions made on any subject 
regarding the stores and A-76, but we are initializing the 
planning to prepare in the event, when January 2009 comes, that 
we must start the A-76 studies.
    Mrs. Drake. I am sure you could give us a whole list of the 
benefits of the current system as opposed to contracting out 
employees, so I will not make you do that. I know we feel very 
strongly about the employment of spouses and of family members, 
and we heard about your first job in a commissary. So I just 
think that has a lot of benefit added to it as well to provide 
those jobs within our commissaries to our family members.
    So I am sure you will keep us posted on what the outcome is 
and whether you are going to actually do those studies. I would 
also like for you to tell us where those four studies will be 
when you are able to identify that.
    Mr. Page. Thank you.
    Mrs. Drake. Thank you for that.
    I just would also like to add to what the chairwoman and 
what Mr. McHugh have brought up about the cap on the sales, the 
$1,100.
    Admiral, of course, you know, you showed me the Oceana 
Exchange right at Christmas time. I want everyone to know that 
I could not find another store where I could have gone and 
could have bought as many things in one place. It was very 
difficult for me at Christmas time to be looking at what was 
right at my fingertips, and I had to go to several stores to 
make those purchases.
    You used the term ``savings and value.'' What I saw is that 
you have got two other things, too. That is you have got 
convenience, and you have got the confidence of our service 
members that, when they are buying a product from you, they 
know that the value is there, and they know that the quality is 
there.
    So I really hope we will continue that discussion, and we 
will continue trying to change the Senate's opinion on how 
those things are done.
    So thank you, Madam Chairman. I yield back. Thank you.
    Mrs. Davis. Thank you, Mrs. Drake.
    Ms. Tsongas.
    Ms. Tsongas. I think, General MacDonald, this will be a 
question for you.
    I recently was in Afghanistan where we met with our 
soldiers and had a wonderful meal. In the course of a 
discussion with an officer there, he said he was very 
frustrated with the purchasing restrictions, and that he felt 
it would be a more prompt and efficient way, and that it would 
also support the Afghan economy if they could go out into the 
market and buy produce and other things that were available.
    I am wondering why that does not happen, what the 
constraints are and what the concerns are because it seems to 
me it would be more timely and that it would perhaps help 
support an economy in a country that is suffering so. We all 
understand how much we have to help rebuild that country in 
order to be successful in the long term. So I would just 
appreciate your comments on that.
    General Macdonald. Unless I can get some help from my panel 
members, I am going to take that for the record, ma'am. I 
really do not know the answer on that at all. I am not seeing 
any accepting of this question, so I will take that for the 
record.
    Ms. Tsongas. I will take it for the record. Thank you.
    [The information referred to can be found in the Appendix 
on page 205.]
    Ms. Tsongas. The other thing we heard about from many of 
the soldiers was that we all know the impact on their families 
through these multiple deployments. There were great 
expressions of just how hard it has been. They also expressed a 
desire for video conferencing that is easier, that is more 
readily available. They saw it as a real means to sort of feel 
closer to their family members in order to make it easier for 
them as well as for their loved ones back here in this country.
    Again, I do not know what is possible, but I just want to 
take what I heard and communicate it to you because it was 
something that I heard from many, many of those we spoke with.
    Ms. Arsht. We do expect to have that in Afghanistan soon. 
It is coming.
    Ms. Tsongas. That is good to hear. Thank you.
    Mrs. Davis. Thank you.
    Dr. Snyder.
    Dr. Snyder. No. I am fine.
    Mrs. Davis. Okay. Great.
    One of the issues I wanted to raise is the exchange 
dividend contributions to MWR.
    With the exception of the increase in Army and Air Force 
exchange service dividends in 2007, if we look at the review of 
the dividend contributions to MWR from the exchange, it looks 
like they have been declining or have been stagnant since 2004, 
notwithstanding what is really a steady growth in sales. So I 
wonder if you could talk to us about that. Private sector 
competition obviously plays a role in this.
    General Thurgood, Admiral Bianchi, Mr. Larsen, what should 
we expect regarding dividend contributions to MWR over the long 
run?
    General Thurgood. Ma'am, let me start first.
    You used two words in the beginning of your statement, 
``confidence'' and ``growth.'' I think, if you had to pick two 
words in the way we want to take the dividend stream, it would 
be around those two words.
    We want to instill confidence in our customer base--the 
Army, the Air Force, the Navy, the Coast Guard, and the 
Marines--that we will deliver on our commitment to the dividend 
stream, and we want to grow that dividend stream.
    From an AAFES standpoint, I think what you will see 
realistically over the next two years, meaning 2008 and 2009, 
as we start to pay for our technology that we have been 
developing for the last four years, is that we are going to 
have to capitalize that over the next five years. I think, in 
2008 and 2009, you will see it flat to slightly declining, but 
our strategic target is to deliver record earnings to both the 
Army and to the Air Force by 2012. Our target is to deliver 
$200 million to the Army and $100 million to the Air Force by 
2012. You will see that, as we try to create a culture of 
ownership, a culture of entrepreneurism, and as we drive our 
performance throughout the organization in a way that----
    Mrs. Davis. What do you think gets in the way of that now?
    General Thurgood. Our culture. And there are a couple of 
things, I think, that are important to note.
    One is, we have got to create in our organization, as I 
mentioned, a culture of ownership where our associates at the 
very lowest level of our organization own this business so 
that, when customers come into one of our stores, they come in 
because we are creating a different in-store experience for 
them than we have ever had before. They are coming in because 
they know the value proposition is so clear that they want to 
shop at our stores. Now is the time for us to strike hard 
because of the economy, and it is important that we do that 
right because, just from a directional point of view--and I 
will use Fort Hood as an example.
    In 1970, around Fort Hood--and these numbers are not 100 
percent right, but they are directionally correct to tell the 
story--70 percent of our families lived on Fort Hood. There 
were no Wal-Marts, and there were about 100 shopping venues 
outside the gate. Families were not a high priority for us. 
Today, 70 percent of our families live off post. There are 6 
Wal-Marts around Fort Hood, and there are 1,000 shopping 
venues.
    And therefore, for AAFES to continue to drive and to 
deliver a dividend stream, we have to, as I mentioned earlier, 
be very effective marketeers. We have to realize that we 
compete in a global marketplace. And to the extent that we can 
drive productivity in our supply chain and glean that out, 
those dividends fall directly to the services.
    So our commitment is consistency so that the Army and the 
Air Force and the other services know exactly how much they are 
going to get. We want to commit to that number, and we want to 
grow that number over the years. I think you will see that as 
we lay our strategic plans out.
    Mrs. Davis. In 2007, there was a spike.
    General Thurgood. There was.
    Mrs. Davis. And then you have a prediction that is quite a 
bit lower than that. To what do you attribute that? What was 
going on?
    General Thurgood. Let me address 2007 first.
    In 2007, we had historic productivity in our enterprise. We 
delivered over $140 million of productivity, and that was 
driven, as Mr. Myers mentioned--and he made these nice comments 
about the leadership, but it is really about our folks at the 
bottom line making a difference. So we were smarter purchasers 
of everything. We spent about $7 billion a year on cost of 
goods sold. We purchased better. We had supply chain 
efficiencies in terms of how we optimized our distribution 
network on the logistics side. Our employees were much more 
productive than they were before. So we are taking all of those 
things that we learned in 2007, and we are going to duplicate 
those in 2008.
    All of that productivity will not be enough to overcome 
capitalization and depreciation for our new technology. Once we 
get that employed and fully leveraged, which will take us about 
18 months, you will start to see that dividend stream.
    Mrs. Davis. So that would really speak to the decline in 
expectations that you have for 2008?
    General Thurgood. Exactly. Yes, ma'am.
    Mrs. Davis. Does anybody else want to comment really 
briefly?
    Admiral Bianchi.
    Admiral Bianchi. Yes, ma'am.
    I would say that I am, actually, very proud of our track 
record over the past years. I think, if you look at the 
exchange operating profit, which is really the money the 
exchanges are earning and delivering, it has had an upward 
trend throughout this period. That is in an environment where 
we have a decline in active duty force. We have had same-store 
sales increases for the last nine years. Our customer 
satisfaction score has been on a steady increase. We just hit 
80 this year, which puts us up with the likes of Nordstrom and 
Saks and so forth. So we are very pleased in that regard.
    What has actually happened that has caused some of the 
vagaries in the dividend is sort of the below-the-line things. 
We have seen during this attendant period a 30-some percent 
increase in medical costs. We have seen issues like Mount 
Pinatubo adjustments and other sorts of, again, extraordinary-
type expenses.
    I think what you will see in the outyears is that we are 
projecting--for Mr. McHugh there, I know he made his comment 
about the outyears, but we do believe strongly that we will see 
increased dividends. In fact, the numbers we submitted to your 
subcommittee will show us growing by about 37 percent in the 
dividend earnings throughout 2013.
    Again, I think, if you look at the basic business, we have 
been on a very solid, positive trend over the years. Again, it 
has been these expenses which we have tried to rein in, and we 
are doing this again in the midst of a declining active duty 
Navy population. So I think we have been----
    Mrs. Davis. Mr. Larsen, do you want to add anything 
specifically? I know my time is up. I wanted to just give you a 
very quick chance.
    Mr. Larsen. Yes, ma'am.
    Very quickly, the Marine Corps is aggressively undertaking 
a recapitalization program. This year, we renovated three of 
our major exchanges. There are several others that are either 
going to be renovated or have new construction within our 
capital budget and within the funds we have for our 
construction program.
    Additionally, we also are looking at our customer surveys 
and are making sure that we are providing a good benefit and 
that we create an atmosphere where there is confidence so that 
people will want to come in and shop with us. So we feel 
confident that we are going to continue to provide a good 
dividend to support the programs we have.
    Of our programs, probably the biggest driver is our 
exchange, but we also have other revenue-generating programs 
that we have refreshed that we are looking at that we decide 
how we are going to see how they can sustain themselves in the 
future. So we feel confident about moving ahead.
    We thank AAFES for the additional dividend that we receive 
from them for our sales that we have in Afghanistan and in Iraq 
with them.
    Mrs. Davis. Thank you.
    Mr. McHugh.
    Mr. McHugh. Thank you, Madam Chairman.
    Back in 2007, Secretary Dominguez issued a letter that was 
important for a number of different reasons, not the least of 
which was that it established a policy that appropriated funds 
would have to be used from non-appropriated funds (NAF), not 
appropriated funds from construction related to BRAC and to 
global rebasing, which is a big, big challenge. I think that 
was the right thing to do.
    The concern, of course, is how we go about implementing 
that policy given the fact of the NAF construction impacts of 
that rebasing. BRAC is going to be awfully high. I have seen 
one estimate of $700 million. I do not know what the real 
estimate is. Thus, my question to you, Madam Secretary, is, do 
you have a number that you have looked at? What kind of things 
do you think you need and can or have done to try to provide 
that appropriated funding? I mean, you know, we have got to be 
open-eyed about it. It is a tremendous impact on the available 
appropriated dollars----
    Ms. Arsht. Right.
    Mr. McHugh [continuing]. As correct as I feel the decision 
was.
    Ms. Arsht. Well, I want to say first that, at the staff 
request, we provided a listing of projects that were planned 
for installations that were growing, but that list did not 
represent a validated list of requirements because of BRAC and 
of global restationing and of other service-directed decisions. 
So I think that is the first thing to say, that I think that is 
where the $700 million number may have come from.
    There has been this period of sort of relooking at what the 
proposals were. The fiscal year 2008 Commissary and 
Appropriated Fund program did not include any projects that 
were BRAC-required. We see in the President's budget proposal 
about 29 projects at $281 million that have been validated, as 
necessary, as part of BRAC or restationing.
    So we did think that by restating what is a longstanding 
policy that we have brought a discipline that would be sure 
that we were using nonappropriated and appropriated funding 
sources in the way they were intended.
    Mr. McHugh. Well, I appreciate that.
    Again, when I talk about the erosion of appropriated 
dollars to MWR and when I talk about these kinds of less-with-
more perspectives, it is not to criticize anyone here. I mean, 
we are under an enormous challenge, and no one knows that 
better than you good folks. What I worry about is a good policy 
that we are just not able to live up to. In fact, from 2004 to 
2008, if you look at the number of NAF construction waivers 
that have been requested, it is about 40 percent of all of the 
projects being completed. You know, I think it is fair to say 
that is kind of an overreliance on waivers. This is more of a 
statement than a question. We, obviously, have to do some 
things very differently to adhere to that policy and to reduce 
those numbers of waivers.
    You are certainly welcome, Madam Secretary, to comment, but 
I think that is a challenge you are fully aware of, and I am 
sure you are very interested in meeting it. As I said, it is 
something we are looking at very carefully or are concerned 
about.
    I do not have any further questions right now, Madam Chair. 
I yield back.
    Mrs. Davis. Mrs. Drake.
    Mrs. Drake. Thank you. I just have another topic.
    Is it true that the Department of Defense has issued a 
ruling that you would be required to pay post allowance to all 
U.S. citizens whom you hire to work overseas?
    If so, does that apply to people who already live overseas, 
or are we only talking about people who are hired here and who 
are then transferred overseas?
    Ms. Arsht. No. It includes local hires as well.
    It is a policy that has been in place since 1995 when the 
Department reviewed the treatment of appropriated fund and 
nonappropriated fund employees and ruled that they needed to be 
parallel. There has been a misunderstanding and perhaps an 
uneven application of the understanding about the policy. So 
this recent letter was to clarify that the services are 
required, as a benefit, to pay this post allowance.
    The second part of that letter said there would be a policy 
memo coming to explain how we would treat the backpayment and 
how employees who were entitled to that benefit would apply to 
receive that backpay.
    Then the third part of the memo from Mr. Dominguez was to 
ask for an expeditious review of the policy to make certain 
that it is an appropriate policy for a 21st Century workplace. 
So that review will proceed. For now, the policy is in effect, 
and the services will need to pay it.
    Mrs. Drake. Well, that raises a couple of other questions.
    First of all, do we know what the cost of that is going to 
be yearly for you? Do we know what the retroactive costs are 
going to be?
    If I am understanding you correctly, what you have just 
said is, if a military family is in Virginia Beach and the 
spouse works for Admiral Bianchi, she is going to be paid the 
regular pay, but if her husband were in Germany and she were 
living in Germany with him, she would also get post allowance. 
So can you comment first on the cost?
    Ms. Arsht. The estimate for what the liability could be is 
$68 million. We do not really know how many applicants there 
will be and what the policy will be in carrying out the meeting 
of the demand for fulfilling our obligations under the policy, 
but we will have to accrue those dollars in case of and to 
prepare ourselves for what the outside possibility could be.
    Mrs. Drake. So this will be that much less into the MWR 
accounts. Can you also explain to me why we would treat a 
spouse differently based on where the husband is stationed or 
where the wife is stationed? Was there an explanation of that?
    Ms. Arsht. There was a request for us to review the policy 
as it was currently being implemented. It was either the 
Inspector General (IG) or the Government Accountability Office 
(GAO) that reviewed the policy and told us that we were to 
treat the two different populations in the same fashion. The 
allotment is similar to a cost-of-living payment. So, if you 
are entitled to it, you need to know you are entitled to it and 
are to be paid it.
    Mrs. Drake. Thank you, Madam Chairman. I think we need to 
talk more about that. Thank you.
    Mrs. Davis. Thank you.
    Mr. Murphy.
    Mr. Murphy. Thank you, Madam Chairman.
    Thank you to the panel for your service to our great 
country. I appreciate it.
    Mrs. Davis. Your mic is not on.
    Mr. Murphy. My mic is not working?
    Mrs. Davis. It is not.
    Mr. Murphy. No?
    Mrs. Davis. Is it on?
    Mr. Murphy. Is this better? There you go. It always helps 
if you put the button on.
    Sir, you know, I thought of your alma mater. So I do not 
know--you know, we never had those audio issues at West Point.
    Again, I want to thank the panel for your service to our 
great country. I know your role in keeping the hearts and minds 
of our troopers in the right place is greatly appreciated by 
this Congress.
    I want to highlight--I know we combined the two hearings 
this year as compared to last. At last year's hearing on 
military re-sale programs, I had pressed Secretary Dominguez 
about my concern over the exchanges' declining profits. Less 
profits means less money for the MWR dividends, which means 
less programs in support for our troops and their families. I 
asked the Secretary whether he thought we should increase the 
percentage of the exchange profits that are used for MWR 
dividends. He responded that he believed that the exchange 
system would be able to reverse the trend of receiving profits 
through cost-cutting measures. So my question today to the 
board is, do you agree with the Secretary's assessment that the 
exchange system's profits can be increased through cost-cutting 
measures? What steps has the exchange system taken in the last 
year to cut overhead to ensure maximum profitability in how it 
affects MWR programs?
    General Thurgood. Thank you very much for the question. Let 
me just highlight from an AAFES perspective.
    Last year, we delivered $140 million in productivity, and 
that was driven through several big buckets--employee/associate 
productivity, logistics supply chain productivity as well as 
buying smarter. Those things will continue to move forward. 
Additionally, we will continue to work in a collaborative way 
with all of our exchanges and with MWR sister agencies to drive 
productivity wherever we can lead it out of the supply chain.
    So I think that there is good hope--``hope'' is not a plan. 
Let me back up. There is a plan, and you will see that from an 
AAFES perspective and from the exchanges' perspective that as 
we continue to focus and to leverage our technologies in 
different ways than we have before, as that technology comes to 
fruition, as we create a culture of ownership and 
entrepreneurship and innovation within our own organizations, 
all of that will drive productivity.
    Now, having said that, we cannot save ourselves for the 
future. We also have to be good marketeers and grow the top 
line as well, which is why all of the things that we talked 
about earlier--ASE restrictions, making sure that we have 
world-class facilities, that we are building those facilities 
in a way that creates a sense of community and a new shopping 
experience going forward--drive us toward the productivity that 
I mentioned. It makes us better competitors in the global 
supply chain, and at the end of the day, it will deliver 
better, consistent-growing dividends for the MWR program.
    Mr. Murphy. Thanks, General.
    I am reviewing my testimony from last year. I know, I cited 
that the profit and the dividend ratio stayed steady for about 
55 to 60 percent of the profits going to fund MWR dividends, so 
we were seeing declining profits.
    Do we have to expand that or are we locked in still at 
about the 55 to 60 percent currently?
    General Thurgood. That is probably not a question for me. 
We will deliver the dividend, and somebody else can figure out 
how to divvy it up.
    Mr. Murphy. Sir.
    Admiral Bianchi. Sir, I would just offer from the Navy 
exchange perspective that, right now, our split within the Navy 
is that 70 percent of the dividend goes to MWR, and 30 percent 
goes back into the exchange for recapitalization. We have had 
this reaffirmed by our board of directors that we have within 
the Navy that includes three-star-level admirals and 
representatives from the fleets and so forth.
    We believe that is a successful model because we had a 
period of time about 10 years or so ago where we were not 
recapitalizing. I think what we saw was customer 
dissatisfaction, and that drove footsteps out of there. So it 
becomes kind of a vicious circle if we are not able to 
replenish the brick and mortar.
    The only other thing I would offer in terms of efficiencies 
and so forth is that General Thurgood mentioned cooperative 
efforts. That has been a key area especially this past year. 
For example, we have combined with AAFES in stuffing vans that 
go overseas. We have increased the utilization of those by 
almost 10 percent. We are saving about eight percent on 
commercial rates by using some of the similar contracts that 
they have. So I believe we are positioning ourselves to be as 
efficient as we can. At the same time, we are trying to drive 
an increase in sales, and we have seen consistent sales growth 
over the last six or eight years.
    Mr. Murphy. I am sorry. Go ahead.
    Mr. Larsen. Well, from the Marine Corps perspective, if I 
could--from the Marine Corps exchanges from our perspective,you 
know, we feel very good about where we are this year. We have 
increased our sales and have increased our dividends. At the 
same time, we have had three of our major stores under 
renovation. We have also had a significant amount of the Marine 
Corps deployed. So there needs to be an understanding of why we 
continue to increase our sales and dividends while we have 
those other conditions that affect the number of people and the 
availability of people to take advantage of the benefit. A 
couple of those things is what we have done as an organization.
    We have centralized our buying. We have a centralized 
banking contract that has increased the efficiency of our 
organization in the way we do business. Another major reason 
that the Marine Corps is able to provide those dividends and to 
keep them is that, the way we are organized and the way that we 
spend that money, the money is generated on the installation. 
It remains on the installation. The installation commander then 
has the latitude to put that money into the programs that he 
needs to, so we have the ability not only to generate that 
income and that revenue but then to decide how we are going to 
spend it.
    Mr. Murphy. Can I ask a couple--I have one more.
    Mrs. Davis. One more question, Mr. Murphy.
    Mr. Murphy. Okay. I will wait, ma'am, if that is okay.
    Mrs. Davis. No. Go ahead. Go ahead. We are going to wind up 
in a few minutes.
    Mr. Murphy. Okay. I am a Blue Dog Democrat, which means 
that I believe in strong fiscal discipline, but I also believe 
in strong national defense. When we propose government 
spending, we should also propose a way to pay for it. We call 
it ``pay as you go'' here in Washington. During the Bush 
Administration, far too much of our military funding has been 
appropriated through supplemental spending bills that do not go 
through the regular budgetary process. This affects our 
military's ability to adequately plan, which, in turn, puts our 
Nation at a strategic disadvantage.
    Do the panelists believe that our overreliance on 
supplemental spending bills has hurt their ability to provide 
adequate MWR programs? If so, could they give this committee 
some concrete examples of the budgetary problems that they have 
encountered?
    Mrs. Davis. Who would like to answer that?
    Mr. Larsen. I will take it on for the Marine Corps first.
    You know, the Marine Corps, I think, shares your concern 
about supplemental funding. We have benefited significantly 
from that, and the commandant and the leadership of the Marine 
Corps have recognized that that funding might not be there 
forever, so they have taken steps to make sure that the 
programs that we have for the MWR programs and the family 
programs are funded within the baseline of the Marine Corps' 
budget. So for the next two years--in fiscal year 2008 and in 
fiscal year 2009--we will benefit from the supplemental 
funding. After that, in the POM--the budget is being developed 
right now--our programs are funded in the baseline funding for 
the Marine Corps.
    Mrs. Davis. Anybody else?
    Quickly, Ms. Arsht, did you want to respond? No? Oh, did 
you want to respond?
    Ms. Arsht. Only to say that we have been very grateful for 
the supplemental funding that we have received. It has been 
important additional funding to support warfighters and their 
families in very important ways that we talked about earlier, 
which is it has allowed us to extend our reach, our emergency 
intervention in childcare. There are different ways that we 
have been able to use our authorities to put programs in place 
that we did not have before, whether it is the Playaway books 
in the libraries for service members. These are important 
additions to the budget, but we do see the importance of moving 
out of supplemental and into the baseline all of these 
programs.
    Mr. Murphy. Would you concur with the Marine Corps? 
Obviously, the testimony was that they will have it good by 
2010. Is that what your plan is overall, ma'am?
    Ms. Arsht. I think that all of the services have talked 
about this POM's being an important one. The conversations from 
this POM forward would include moving to baseline funding.
    Mr. Murphy. Thank you.
    Thanks, ma'am.
    Mrs. Davis. Thank you.
    I think, obviously, we spoke to that earlier and to our 
concern that we keep that movement and the increment moving so 
that the programs will benefit for the men and women who serve. 
With the demands on those budgets, of course, we know that 
there is a tug of war there all the time. You know, we think 
that it is important that we focus on what we need to, which 
are the needs and benefits for our military. If I could just 
very quickly--there are a few outstanding issues to the 
committee.
    The Kaiserslautern community center at Ramstein Air Base, I 
think we had heard that that was moving along. Then there seems 
to be concern about whether there really is a plan for 
completion.
    I wonder, Mr. Myers. Could you just tell us, very briefly, 
the current status of that project? Can you assure us that 
service members' nonappropriated funds will not be used to pay 
for cost increases that are being calculated today?
    Mr. Myers. The visiting quarters (VQ) is about 90 percent 
complete. As for the funding, all of the funding is within 
congressional limits. Right now, I believe our forces in Europe 
headquarters, United States Air Forces in Europe (USAFE), have 
the best plan we have ever seen. They have worked closely with 
the German government. The Vice Commander of USAFE has worked 
with the ambassador, the U.S. Ambassador to Germany. They have 
got new people in the German oversight part of it.
    Germany has done an unprecedented thing. It has given the 
U.S. 25 million euros--about $40 million--to correct the 
deficiencies. The roof repair work is being done right now. 
There are ventilation problems and so forth. So they are 
working on the project.
    The only project that is coming close to the budget limit 
is the VQ. So what we had said in December of last year is 
that, if it came close, we would resubmit that to Congress as 
an out-of-session. We plan on doing that. We do not believe we 
will bust it, but it is going to be close, and we do not want 
to stop the construction.
    The German government has told us they will be completely 
finished with the project by January. However, our engineers 
are looking at that. They believe it could be done sooner. So 
we continually monitor the program. So, as far as we are told, 
it is on track. The German government is involved. Our vice 
commander is concerned, and he is the monitor right now.
    Mrs. Davis. Okay. Thank you.
    Just one final question on the military resale operations 
at base closure sites. How can we best approach this issue? Do 
you have thoughts about a process or about some standards that 
we need to adhere to as we determine what services should be 
retained at a BRAC location?
    Ms. Arsht. I think you know that our policy is that, when 
an installation closes, the commissary and exchange close 
unless there is an active duty mission and there are at least 
100 service members stationed there.
    We have tried these other models--have combined stores and 
shared facilities--and they have not been popular. They have 
not been profitable. So we are looking at ways--and we have 
alluded to them today, perhaps not in the detail you might 
like--to try to extend the benefit to more eligible patrons. We 
are doing it now in a pilot that DeCA has undertaken and that 
AAFES will soon join of on-site sales. We are focused right now 
on Guard and Reserve to bring that benefit to the families and 
to the members.
    I was able just two weeks ago to go to the Air National 
Guard in Charlotte and to see one of these on-site sales. There 
was a tremendous response from people who would normally have 
to drive 90 miles to the closest commissary.
    So this--and I think Mr. Page would like to speak a little 
bit more about the plans, but we have put a certain number of 
these sales on the horizon for now, and we are adding to them, 
and we are looking at that and also some virtual sale 
capability to try to find efficient and good, solid ways to 
serve those who are eligible but who do not have brick and 
mortar presence.
    Mrs. Davis. Mr. Page.
    Mr. Page. I would be more than happy to add.
    It has been a hugely successful program. We will have about 
120 at a minimum. It could be more than that. The Charlotte 
sale that Ms. Arsht mentioned earlier was so successful that 
they have asked us to schedule two additional sales. We will 
have one in June. In fact, that is the one where AAFES will 
join us. There is a very large customer base there--I think 
about 1,100 Guard members, a huge retiree population. It was 
extremely successful. A lot of very positive comments came 
back.
    We carry about 350 to 400 grocery items. We have produce. 
We have meat. We have seafood. It is a hugely festive event. We 
are tying them in with family days. We are tying them in at the 
Navy Reserve Centers. We are working with all branches of the 
service. I have been personally meeting with them to promote 
that.
    Again, it is an opportunity. It is an option for those who 
are not located near a base or installation; 65 percent of 
Guard members are not located near a base or installation. 
About 42 percent of reservists are not located near a base or 
installation. We are actively seeking to meet their needs by 
delivering the benefit to them.
    Our next stage is to view the Internet as an option. I will 
be, actually, demo-ing it in New York at the Senior Enlisted 
Leadership Council for the National Guard. It is being held 
there tomorrow. So we will demo our option of being able to be 
at home--to have the Guard members be at home--to order 
products and to have them delivered to the Guard center. That 
is the next stage in the process we are developing. It is, I 
think, very exciting, and it does offer options for other 
venues and for other possibilities that might meet the needs 
that you are referring to.
    Mrs. Davis. Okay. Great.
    Thank you all. Thank you all very much. We will submit any 
other questions for the record. We wanted to do this in the 
two-hour time frame, and I think we made it. I appreciate very 
much your comments and your speaking to the point. Thank you. 
We look forward to working with you in the future. The meeting 
is adjourned.
    [Whereupon, at 11:58 a.m., the subcommittee was adjourned.]
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                            A P P E N D I X

                             April 17, 2008

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             April 17, 2008

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[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             April 17, 2008

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              RESPONSE TO QUESTION SUBMITTED BY MRS. DRAKE

    Ms. Arsht. On behalf of the Department, we are exceptionally proud 
and deeply appreciative of the services and sacrifices of all our 
nation's veterans. Based on surveys of our active duty personnel, we 
know the commissary and exchange are highly valued benefits and we work 
hard to protect these non-pay benefits for all who are eligible. The 
Department has not surveyed the active duty members to assess their 
attitudes and opinions about extending commissary and exchange shopping 
privileges to disabled veterans with a 30 percent Service-connected 
disability, along with their dependents. The addition of other 
categories of eligible patrons has been accomplished legislatively, 
based on the compensation status of the individual or in recognition of 
their retired status. The last major change, enacted by Section 651 of 
the National Defense Authorization Act for Fiscal Year 2004, authorized 
unlimited access to commissary stores for Reserve members and their 
dependents. [See page 19.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MS. TSONGAS
    General Macdonald. Food items to feed military members from all 
Services and civilians, including U.S. government employees and private 
citizens, are provided under a Defense Logistics Agency contract by a 
commercial prime vendor. These items are usually transported from U.S. 
sources, while some items, such as produce and bakery items, may be 
procured locally from approved sources.
    Today U.S. government is making a number of local food purchases in 
Afghanistan and is actively working to expand local purchases. We buy 
bottled water from three Afghan bottling plants and a fourth plant is 
awaiting approval. An Afghan soft drink plant has recently received 
Army Central Command medical approval and is being added as an approved 
source for the DLA prime vendor in Afghanistan. However, local purchase 
of food items is a careful and deliberate process requiring medical 
screening and approvals, followed by periodic audits of food sources, 
in order to protect the health and strength of military members and 
civilians. These steps must be accomplished before local purchase of 
foods, such as fresh fruits and vegetables, can be approved and 
conducted.
    There is another, broader initiative to support the Afghan economy, 
the Afghan First Program, administered by the International Security 
Assistance Force under NATO, which seeks to utilize Afghan services, 
purchase Afghan goods, and develop Afghan skills while supporting local 
currency and encouraging economic competition. This Program's motto is 
``support the local economy through local procurement.'' The DLA prime 
vendor in Afghanistan is engaged with this program. [See page 27.]
?

      
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             April 17, 2008

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                   QUESTIONS SUBMITTED BY MRS. DAVIS

    Mrs. Davis. H.R. 4497, bill offered by Representative Lincoln, 
would prohibit the use of gambling devices on DOD property. I have 
noted that the MWR slot machine program contributes $101 million in net 
revenue to support MWR programs. Ms. Arsht, how important are slot 
machines to troop morale? If MWR slot machines were eliminated at 
overseas locations, how serious would the loss of revenue be?
    Ms. Arsht. Gambling devices on DoD property produce a sizeable and 
predictable stream of revenue that support MWR programs. In Fiscal Year 
2007, profits covered approximately 6% ($129.1 million) of non-
appropriated (NAF) MWR expenses ($2 billion). Gambling device revenues 
primarily pay for Category C MWR facility capital improvements that are 
not authorized appropriated fund (APF) support (i.e., food and beverage 
upgrades, golf course upgrades, cabins, and cottages). Funds are also 
used to support a wide variety of quality of life programs such as 
youth and outdoor recreation programs. Loss of these revenues would 
have a significant negative impact on facility renovation and 
construction, equipment purchases, and MWR programs not funded with 
congressionally approved APFs.
    Appropriated funds are not available to replace any loss of slot 
machine profits, so the resulting loss of available funds would also 
have a substantial degrading effect on troop morale, particularly 
overseas, where there are the least off-installation opportunities. MWR 
programs offered worldwide are intended to bring the touches of home to 
Service members and their families. Military communities, as a 
microcosm of American society, are generally entitled to the same 
quality of life activities that are available in the United States.
    On-installation gambling activities are only offered when they are 
available in the host country and are not stand-alone programs. They 
are offered in a controlled environment as just one recreational choice 
among approximately 50 recreational activities, with all profits 
returned to the MWR program.
    Mrs. Davis. The Defense Commissary Agency (DeCA) has been working 
on its ``Workforce of the Future'' (WOF) includes the best practices of 
the private sector which would hopefully posture DeCA to improve its 
performance in A-76 competitions with private sector industry. The 
Subcommittee appreciates that implementation of NSPS was problematic 
and WOF was never able to move forward on its original schedule. Ms. 
Arsht, given that the Defense Commissary Agency has not been able to 
fully implement its new workforce model, Workforce of the Future (WOF), 
do you agree that the continued exemption from A-76 contracting out 
competitions is the appropriate course of action?
    Ms. Arsht. DeCA is implementing its WOF, to provide store-level 
employees with more flexible position descriptions, allowing them to 
cross-train in multiple positions and provide better advancement 
opportunities, while providing a more efficient workforce. While 
implementation of the WOF will improve DeCA's ability to successfully 
compete with the private sector in A-76 competitions, continued 
exemption from A-76 competitions is not necessary. Competitions could 
be conducted at those commissaries where WOF has already been 
implemented, without disadvantaging DeCA or its employees.
    Mrs. Davis. One of the consequences of the realignment of forces 
from overseas locations and the trend toward increased emphasis on 
joint operations is the establishment of joint installations with 
sizeable populations from multiple services. The combining of military 
resale and MWR activities is complicated by financial and 
administrative problems. Ms. Arsht, given the plan for DOD to establish 
an increasing number of joint bases, how will DOD insure that the 
exchange services and MWR activities and their employees will receive 
equitable treatment?
    Ms. Arsht. Joint bases are important to today's war fighting 
strategy, but will have challenges and growing pains as we work through 
joint operations and standards. Joint bases will be high quality places 
where people want to live. Centralized guidance has been issued to 
cover this important area. Using the Joint Standards as a beginning 
point, DoD will oversee, visit, and assist the joint bases in achieving 
equity, while ensuring that services are delivered to the benefit of 
all Service members. Further, equitable treatment of our employees will 
be a priority. Ultimately, joint installations will provide seamless, 
high quality services to Service members and their families, regardless 
of their parent Service.
    Mrs. Davis. Mr. Baker, Mr. Larsen, General Macdonald, and Mr. 
Myers, what are the services doing to identify and counsel service 
members and their family members who are addicted to gambling?
    Mr. Larsen. A query, via email, to Marine Corps Substance Abuse 
Counseling Centers (SACC) revealed that a small number of individuals 
(30) sought help for gambling at our SACCs last year. Four 
installations (MCB Camp Pendleton, MCRD San Diego, MCRD Parris Island, 
and MCAS Beaufort) provide counseling services, either at the SACC or 
at General Counseling, for gambling addiction; most refer to Gamblers 
Anonymous (GA).
    Marines and their family members who need assistance with gambling 
addiction can contact Marine Corps Counseling Centers, Personal 
Financial Management Specialists, or Military OneSource for referral to 
community support organizations such as GA, Gam-Anon, and the National 
Council on Problem Gambling. Many school districts also provide 
programs to help students with gambling addiction.
    In addition to referral services, Marine Corps Community Services 
will increase awareness on the risks associated with gambling and 
referral resources through targeted literature.
    Mrs. Davis. Mr. Baker, Mr. Larsen, General Macdonald, and Mr. 
Myers, what are the services doing to identify and counsel service 
members and their family members who are addicted to gambling?
    Mr. Myers. Gambling addiction issues may surface when Airmen or 
family members seek assistance for financial, relationship, or other 
personal issues from an Airman and Family Readiness Center (A&FRC), 
Military One Source (MOS) consultant, or contracted Military Family 
Life Consultant (MFLC). While A&FRCS, MOS, and MFLCs do not offer 
treatment for addiction issues, all will provide education resources, 
answer questions about treatment options and facilitate connection to 
the appropriate level of assistance including self-help/support groups 
or long-term counseling options.
    Mrs. Davis. Mr. Baker, Mr. Larsen, General Macdonald, and Mr. 
Myers, what are the services doing to identify and counsel service 
members and their family members who are addicted to gambling?
    Mr. Baker. Compulsive gamblers can be identified in a number of 
ways. Gamblers may make self-referrals, the command may make a 
referral, or judicial referrals can be made. Chaplains, mental health 
professionals, and Fleet and Family Support Center staff may all 
provide counseling and referrals on gambling issues. Counseling through 
military resources is most often provided on an outpatient basis and 
can be provided by any of the sources mentioned, depending on the 
issue. For example, Fleet and Family Support Center staff may work with 
financial hardships that have resulted from problem gambling and would 
refer the individual to a mental health provider to address behavioral 
issues. Some installations host support groups for individuals 
suffering from problem gambling as part of their substance abuse 
programs. They may also make referrals to civilian outpatient programs. 
Navy Substance Abuse Rehabilitation Program (SARP) and Mental Health 
departments can provide initial evaluation for those with a gambling 
problem. However, SARP does not provide outpatient services to treat 
gambling addictions. Referrals are made to appropriate network 
providers and to Gamblers Anonymous (GA).
    A member may be referred for an evaluation as part of a legal 
proceeding or for counseling and assistance whenever deemed to have a 
mental/medical/physical problem that adversely affects the individual, 
unit, or good order and discipline of the command. Under Military Rule 
of Evidence (MRE) 513, communications made to a psychotherapist, 
clinical psychologist, or licensed clinical social worker for the 
purpose of facilitating diagnosis or treatment of the patient's mental 
or emotional condition are privileged from disclosure in cases arising 
under the UCMJ. Military mental health providers can refer an 
individual for assistance to a civilian treatment facility if the 
military location does not provide the needed expertise or care.
    Mrs. Davis. Mr. Baker, Mr. Larsen, General Macdonald, and Mr. 
Myers, what are the services doing to identify and counsel service 
members and their family members who are addicted to gambling?
    General Macdonald. Army Family programs promote resilience and 
satisfaction with military life through prevention, education, and 
training. These programs are critical to the well-being of Soldiers and 
Families, and directly influence the Army's ability to sustain mission 
readiness.
    In an effort to identify Soldiers and Family members with gambling 
addictions, we coordinate with the medical staff (MEDCOM), specifically 
the clinical professionals in the Department of Behavioral Health and 
other health care providers. The Army's Alcohol and Substance Abuse 
Program screens for all compulsive behavior. Potentially addicted 
gamblers may be identified as a result.
    Army Community Service (ACS) provides referral services to assist 
Soldiers and Family members identified with behavior and debt typically 
associated with an addiction to gambling.
    Other resources for military Families include Chaplains, Military 
Family Life Consultants (MFLC), and Military OneSource (MOS). The MFLC 
provide much needed, on-demand support to Soldiers and Families. MFLC 
outreach efforts include direct consultation, classes, groups, and 
sessions for emotional well being which can be tailored to address 
gambling addiction. Military OneSource is a 24-hour, 7-day a week toll 
free information and referral telephone line and internet/Web based 
service which includes face-to-face counseling sessions available to 
active and reserve component Soldiers, deployed civilians, and their 
families. It augments our installation family support services to 
families living off installations. Soldiers and Family members needing 
intense, long term addiction counseling are referred to the TRICARE 
network.
    Finally, Commanders may direct or recommend counseling services for 
Soldiers who they believe have gambling problems. In instances where 
there appears to be addictive behavior, Soldiers are referred to the 
Department of Behavioral Health for further assessment and treatment as 
warranted. Gamblers may also self-refer for assistance.
    Mrs. Davis. The Defense Commissary Agency (DeCA) has been working 
on its ``Workforce of the Future'' (WOF) includes the best practices of 
the private sector which would hopefully posture DeCA to improve its 
performance in A-76 competitions with private sector industry. The 
Subcommittee appreciates that implementation of NSPS was problematic 
and WOF was never able to move forward on its original schedule. Mr. 
Page, if an extension of the exemption from A-76 competitions would 
give you till 2011, is that sufficient time for the Defense Commissary 
Agency to implement its workforce of the future?
    Mr. Larsen. Implementation of the WOF will provide store-level 
employees with more flexible position descriptions, allowing them to 
cross-train in multiple positions and provide better advancement 
opportunities, while providing a more efficient workforce. DeCA is 
implementing WOF through attrition, filling vacancies as they occur, 
under the new position descriptions. After expiration of the 
moratorium, A-76 competitions will resume first at those locations 
where WOF has been implemented in order to provide DeCA employees the 
best opportunity to compete successfully with the private sector.

                                  
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