Defense Primer: Military Commissaries and Exchanges

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Updated November 21, 2024

Defense Primer: Military Commissaries and Exchanges

The Department of Defense (DOD) offers certain quality- of-life benefits to military members, their families, and retirees. The general purpose of these benefits is to attract, retain, and support morale and readiness for military servicemembers. One of these benefits is worldwide access to grocery and retail stores—called commissaries and exchanges—typically located on military installations. Commissaries provide subsidized groceries and household goods to eligible patrons. Exchanges sell goods for profit, similar to a department or specialty store, but use some of this profit to fund various Morale, Welfare, and Recreation (MWR) activities (see Table 1).

Organization and Management

Defense Commissaries The modern commissary system began in 1867. Each of the services operated its own commissaries and exchanges until 1991, when the commissary system was consolidated under the Defense Commissary Agency (DeCA). According to the DeCA Annual Report for FY2024, as of September 30, 2024, DeCA operated 235 stores on military installations worldwide, serving approximately 8.3 million authorized households in 13 countries and 2 U.S. territories; and employing a workforce of 12,963. DeCA aims to provide food savings of over 25% compared to civilian marketplaces. As a defense agency, DeCA reports to the Office of the Secretary of Defense and has a board of directors composed of members from each of the military services. DeCA provides subsidized groceries and household goods at cost plus a 5% surcharge that is used to fund new commissary construction and store-level refurbishment, maintenance, and equipment.

Table 1. Breakdown of Commissaries vs. Exchanges

Commissaries Exchanges

Funding Appropriated Funds (APF)

Sales of goods, non- appropriated (NAF)

Management DeCA Board of Directors

Board of Directors for each exchange system

Products Grocery and household goods

Clothing, shoes, uniforms, furniture, computers, alcohol, cigarettes, jewelry

Online Sales and Delivery

Limited* Yes (excludes cigarettes, alcohol, and military uniforms)

Sources: “About DeCA” at https://corp.commissaries.com/our- agency/about-deca and “Exchange Quick Facts,” at https://www.aafes.com/about-exchange/exchange-quick-facts/. Notes: *In 2013, DeCA started a program offering online ordering with curbside pickup, known as Click2Go. New features include ordering via a mobile app and online payment of Electronic Benefits Transfer/Supplemental Nutrition Assistance Program (EBT/SNAP).

Military Exchanges DOD maintains an exchange system that includes the Army and Air Force Exchange System (AAFES), the Navy Exchange (NEX), and the Marine Corps Exchange (MCX). Each system has its own board of directors to align operations and services. These exchanges provide military installations with goods and services similar to department stores and are often located near commissaries. Some exchanges also operate gas stations, mini-marts, food courts, barber and beauty shops, and liquor stores, some of which are operated by outside or contract vendors According to AAFES, “the exchange system operates more than 5,500 facilities with operations in more than 30 countries and four U.S. territories,” and “serves an eligible customer base of 31 million shoppers.” DOD regulates what items may be sold at commissaries and exchanges to comply with statutory requirements (10 U.S.C. §2483) and to avoid direct competition with one another.

Authorized Patrons

Authorized patrons of military commissaries and exchanges include active duty, National Guard and Reserve members, military retirees, Medal of Honor recipients, veterans with service-connected disabilities, and certain family members or dependents. Since November 11, 2017, DOD has allowed limited online exchange shopping privileges to all honorably discharged veterans. Veterans may verify eligibility at https://www.vetverify.org/. On January 1, 2020, more than 4 million service-connected disabled veterans, Purple Heart recipients, former prisoners of war, and their primary caregivers were granted eligibility to full commissary access and certain MWR activities in Section 621 of the John S. McCain National Defense Authorization Act (NDAA) for FY2019 (P.L. 115-232). Section 641 of the FY2020 NDAA (P.L. 116-92), extended certain MWR privileges to Foreign Service officers of the Department of State on mandatory home leave. The FY2021 William M. (Mac) Thornberry NDAA (P.L. 116-283) enacted on January 1, 2021, included provisions (Sections 631 and 632) that authorized base first responders the use of commissary stores and MWR facilities, and external first responders’ access to mobile commissary or exchange stores when deployed to an area covered by a declaration of a major disaster or emergency. On April 29, 2021, DOD announced expanded access effective May 1, 2021, to DOD and Coast Guard civilian employees and civilian retirees to shop at military exchanges in the United States, U.S. territories and possessions. Online access became available to these patrons in October 2021.Civilian dependents were not included in this expanded access. The NDAA for FY2024 (P.L. 118-31) enacted December 22, 2023, included a provision in Section 633 that allows

Defense Primer: Military Commissaries and Exchanges

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remarried surviving spouses access to commissary and exchange privileges.

Funding

Commissaries: Appropriated Funds DeCA is an appropriated fund activity (APF). Congress funds commissary operations with an annual appropriation to the DeCA Working Capital Fund (WCF). According to DeCA’s FY2024 Annual Financial Report, its operation costs were $1.7 billion. By law (10 U.S.C. §2483), appropriated funds may be used to cover employee salaries and wages, utilities, communications, operating supplies and services, food shipments to overseas destinations, and other management, equipment, and/or information technology costs.

Table 2. DeCA Appropriations FY2020-FY2025

Fiscal Year Amount in Billions

FY2020

FY2021

FY2022

FY2023

FY2024

FY2025

$1.0

$1.2

$1.2

$1.4

$1.4 (requested)

$1.6 (requested)

Source: DOD, Overview–FY2025 Defense Budget, Figure 4.3. Military Family Support Programs, March 2024, p. 4-14 (PDF p. 72) and earlier budget requests at https://comptroller.defense.gov/Budget-Materials/.

Exchanges: Non-Appropriated Funds Unlike commissaries, exchanges sell merchandise for profit similar to retail or department stores. In 2023, AAFES reported that it generated over $8.5 billion in annual revenue and $308 million in dividend-eligible earnings. These dividends are paid into the Services’ Central Welfare Funds, which cover operating expenses, maintain facilities, and fund MWR programs and services such as leisure travel, fitness centers, Child Development Centers, youth programs, outdoor recreation, and movie theaters.

Commissary and Exchange Reform Proposals

Congress has periodically considered proposals to reform DeCA; such efforts generally have sought to explore ways to reduce DeCA’s reliance on appropriated funds without reducing patrons’ commissary benefits and/or revenues generated by military exchanges. Some of the past proposals from military commissions, think tanks, or legislative agencies have included one or more of the following: • reducing or cancelling the commissary subsidy; • consolidating the commissary and three exchange

systems into one entity, the Defense Resale Activity (DeRA);

• expanding commissary and exchange eligibility to

additional veteran groups; and/or

• charging user fees for certain categories of patrons (e.g.,

DOD civilian employees).

Military, retiree, and veteran service organizations have generally opposed any reduction to the commissary subsidy

and advocate for maintaining the current system. They are concerned that changes could dilute the perceived or actual benefit for eligible patrons (particularly military retirees who may be on a fixed income), harm recruitment and retention, and reduce the revenues generated for MWR activities. Advocates for the commissary and exchange systems also note that the systems provide job opportunities for military spouses and other dependents. Those who have proposed a reduction or cancellation of the commissary subsidy argue that the current benefit is not efficient or equitably distributed among eligible patrons and that running a chain of grocery stores is not a core function of DOD. Some military personnel are assigned to locations without convenient access to a commissary. In particular, military retirees and reservists may be less likely to live in close proximity to an installation with commissary services. Further, with the expansion of discount grocery stores and grocery delivery services, the commissary benefit may not be as attractive as it once was. One alternate proposal is for DOD to use the savings generated from a reduction in the subsidy toward an annual “grocery allowance” for active- duty military families that could be better targeted to specific pay grades with higher need (i.e., junior enlisted). Proponents for consolidation contend that merging all systems into a single Defense Resale Activity could save money by streamlining functions such as accounting, administration and support; allowing for greater flexibility of products sold; and aligning incentives for commissaries and exchanges.

Relevant Statute

Title 10, U.S. Code Chapter 54 Title 10, U.S. Code, Chapter 147

CRS Products

CRS In Focus IF11233, Defense Primer: Defense Working Capital Funds, see sections “A Brief History of DWCFs” and “DeCA DWCF.”

Other Resources

DODI 1330.17, DOD Commissary Program DODI 1015.10, Authorized Patronage of Military MWR Programs DOD MWR and Resale Policy Issuances

DTM 21-003, “Access to Morale, Welfare, and Recreation Category C Online Activities, DoD Commissaries, and Military Service Exchanges,” April 19, 2023.

DeCA, “Making the most of your benefit: Former POWs, Purple Heart recipients, disabled veterans, certified caregivers may also shop at the commissary,” DeCA Corporate Communications, August 9, 2024.

Keith Desbois, DeCA public affairs specialist, “SERVICE and SACRIFICE: DeCA honors America’s veterans by promoting commissary benefit to those who’ve earned it,” DeCA Corporate Communications, November 7, 2024.

Barbara Salazar Torreon, Senior Research Librarian Kristy N. Kamarck, Specialist in Military Personnel

IF11089

Defense Primer: Military Commissaries and Exchanges

https://crsreports.congress.gov | IF11089 · VERSION 17 · UPDATED

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