ALA’s Larry Lapka reports.
On the morning of Jan. 30, the ALA held an hour-long webinar provided virtual attendees with a wide range of discussion topics related to the latest actions of the Trump Administration and of the new Congress, and weaved those moves into how they might affect the business of military resale.
“The association is actively kicking into gear commensurate with all of the activity that is taking place across the board in Washington in the executive branch and Congress that is going to affect our business going forward,” Rossetti said.
He explained, “We are monitoring, and we are also reacting, and I want to ensure you that we are going to ramp up our communications as the transition to the Trump Administration continues, trying to put some perspective and narrative to issues that are evolving, some of the people that are being put in place in the administration, getting a good feel for what the direction of the administration and the Congress will be in the next few months, that will have an effect on our business.”
Rossetti said that ALA swims in two oceans. “We swim in the commercial ocean, as we are in the military channel business, but we are also heavily involved with our resale partners, and the administration and Congress in advancing our agenda.
“We have your interests at heart. Much of what your businesses do are dependent on the way the government behaves, and how issues are shaped and focused going forward. We want to make sure that you have all the key business intelligence that we can muster to help you guide your decision making as we navigate through this transition in the coming year.”
WEBINAR TOPICS
Among the many topics Rossetti discussed during the webinar were the following:
HIRING FREEZE
The ALA president noted that were several key ones he wanted to focus on, the first being the hiring freeze.
“We have received word that the freeze would be lifted for the Department of Defense,” he stated, although there has not yet been mentioned the lifting of the freeze on other pertinent entities, including veterans. “We should be getting information later today on how that is taking place.
“DoD will be exempt from the hiring freeze, and the non-appropriated fund programs will be exempt as well. That is very key. Appropriated funds cover the Defense Commissary Agency, with non-appropriated funds covering the exchanges.”
Rossetti noted that the return to work executive order is “a little more complicated.
“The implementation guidance is tumbling down through the administrative process,” he stated. “Basically, how it stacks up is that a communication went out to federal workers yesterday, saying that you have the option of returning to work or resigning.
“That gives federal workers eight months of pay if they choose to resign instead of returning to the office, but the expectation is that somewhere around 10-to-20 percent of federal workers may take it, and I think it will be on the low side of that, we just saw some report that 11-to-14 percent may elect to go with this option and retire early rather than go back to work.”
Rossetti described this as “a broad mandate” that has been put out. “but I believe it is going to be like a lot of policies — broad mandates hit like a tidal wave, and then the swiss cheese starts kicking in … there are holes in the process and exceptions.
“We have seen how the government behaves during a government shutdown, where there are certain critical entities that are in an “excepted” status, with consideration allowed to continue to operate, so we will see how this policy is implemented … both the commissary agency and the exchanges are looking closely at this, and they are going to be calibrating their actions based on guidance that tumbles down through the various echelons of government on the return to work policy. We will see a lot of finite guidance coming on that.”
Funding freeze
Another executive order pertinent to this business is the funding freeze.
“Basically, what happened is that Office of Management and Budget offered a broad edict on a wide range of programs, many of which operate in the quality-of-life area, where funding was frozen,” Rossetti explained.
“But like I said, the swiss cheese is having an effect on that, and OMB put out a memo yesterday stating the freeze was lifted, but then again, there is some ambiguity associated with that,” and he told attendees, “We are sorting through that.”
Inspectors general
Rossetti said that he found this executive order “interesting” and at the same time “shocking.”
“I have worked with the IG community for years, they are very forward-leaning people, and they do generate at lot of savings for the department,” he said. “I might be misreading this, but my read is that what they want to do is to reform the IG community and incorporate what a lot of the IGs do, reforming government and identifying efficiency.
“I think that this was the firing of the first shot, but all of the IGs were affected by being relieved of their duties in 17 major agencies including defense.
“We are watching this one very closely because that is kind of a ‘canary in a coal mine,’ and it will tell us what and how the DOGE are going to govern efficiency, and how efficiency initiatives and budget initiatives are going to be handled.”
Minimum wage
One executive order that the new president nullified was one of great importance to military resale and its partners, the repeal of the minimum wage mandate.
“The minimum wage has been plaguing operations, primarily of the exchanges,” he explained. “What we are hearing is that agency officials are looking at that nullification and should be issuing guidance that people are striving toward — to nullify that $15 minimum wage for federal workers, and also extend it to non-appropriated fund workers.
“It has had a multi-hundred-million-dollar effect on the exchange business, and we have been advocating for its nullification, and return to the policy where pay is locality-based, based on what the prevailing wages are outside the gate, as opposed to a broad mandate that pushes the minimum wage up to $20 an hour and is choking a lot of the business, again primarily in the exchanges, and hampering their ability to perform their mission.”
Rossetti noted that they have “some relief” in appropriations from the impact of that minimum wage that was implemented several years ago, “but nowhere near what they need to make themselves whole as a result of this wage.
“We are glad to see this taking place, but there was some dispute as to whether the order was exactly nullified, but we hear that that is all moving in a positive direction, and hopefully, we can get rid of this hindrance and move forward.”
Rossetti said there has not, thus far, been a nullification of this policy for federal contractors, and ALA is petitioning the administration “to get that into a place where there is relief along those lines, because it is affecting the cost of doing business with the various entities. Excess costs often get reflected into the price for consumers, and it also reduces the commissions for some of the concession operations that do business in our channel. We are actively working to get that nullified.”
Department of Government Efficiency
Rossetti told attendees that this entity — headed up by Elon Musk — is operational.
“A lot of the things coming out include the personnel actions, the hiring freeze, the return to work, all of that, is being fed by this department,” he noted. “They are going to be taking a very hard look at technology; in fact, they incorporated the U.S. Digital Service into this department, and given Musk’s background, and the emphasis of the administration, we are going to see a lot of action coming out of DOGE.
“I expect it is going to be a lot like the National Performance Review which was implemented years ago under President Clinton. That had a mini-office in each of the federal agencies, and I would expect that there will be something set up within the Department of Defense, probably in the deputy’s office, the deputy secretary of defense office, and comptroller, and it will start looking at programs under the microscope, and we will try to get our input into these organizations as they stand up and make sure that they understand the positive balance sheet aspect of this system.”
Rossetti believes that the overall DOGE “process” is still coming together.
“Of course, it is still not an official or government agency that is set up in statute,” he said. “It is set up by President Trump and the Mar-A-Lago transition team to put everything under the microscope.
“Suffice it to say, we are going to be examining this and pushing out as much information as possible as how that is evolving, and how we can deal with that.
Budget
Rossetti told attendees that “there are several moving parts” as where the budget stands right now, “and we track it because so many of our programs are influenced by it.”
He said that right now, under a continuing resolution that extends to March 15, there is budgetary action already taking place.
He explained, “Yesterday, John Thune (R-S.D.), the majority leader, put out word that they are going to be advancing a budget package that is called ‘reconciliation,’ and what it does is basically, if it is tied to a budget process that can use reconciliation, they only have to have a simple majority, 51-to-49, to discharge legislation in the Senate, as opposed to the 60-40 that usually comes along with other legislation.
“They use this expedited process and what they are going to move here in the next couple of weeks is a package that will have a defense wedge in it. I don’t know if they will roll the entire defense budget into the reconciliation package, but what we are picking up is that there may be a $100 billion-to-$125 billion increase to defense in the package that will also deal with border security and some energy issues.
“And what we are hearing as of today is they will move the tax package after that, and that is to extend the tax cuts going forward.”
Rossetti said that there may be two trenches of reconciliation taking place, the first being defense “and how that unwraps” and what will be included in that defense wedge “if it is indeed included” in the reconciliation package going forward.
Russell Vought was nominated as OMB director, and this office will be “heavily involved” to putting into motion the drive toward government efficiency.
Impoundment
Rossetti explained this as a principle “which allows the administration to not spend money that has been appropriated.
“It is a process where even though funds have been allocated, the executive branch can say ‘we’re not going to do it.’
“There is a big debate now on the way appropriations are treated … existing appropriations, can they be impounded, can the administration just unilaterally say that we are not going to spend money that has been appropriated?”
He explained that this is important is because “it can be effective immediately and have an immediate effect on programs throughout the government … they don’t have to wait for the passage of an appropriations bill, they can move just unilaterally on funding, so we are watching that very closely.”
Rossetti said that how this is handled will provide “a pretty good peak” at how the Trump Administration “is going to behave” related to the budget, a big “canary in a coal mine” at how programs might be impacted.
Border security
The ALA said that this area is one to watch for the industry.
“One thing to watch is the deployment of forces to the border,” he noted. “There has already been a deployment of 1,600 from a lot of installations … Fort Riley, Kan., some other Army bases and some Marine Corps bases are being affected by these deployments.
“Then, the president announced yesterday that he may be ramping up Guantanamo Bay, Cuba, to take up to 30,000 people that are being deported.
“So there are defense implications in this border security, and we will be watching it.”
MILITARY COMPENSATION
Rossetti noted that last week, DoD issued its quadrennial review of military compensation, “and this has several interesting aspects to it.
“It provides a lot of demographic information out to our member companies to take a look at the marketplace and see how the demographic is evolving.”
He explained that what the review showed, “for the first time, in a large way, military pay is exceeding civilian pay. That is occurring in both the enlisted ranks and in the officer ranks.
“This evolving demographic dynamic is going to have an effect on consumer behavior, it will permeate on-base businesses in terms of effects.
“What we are going to be doing through our ALA councils and resale partners is to take a very close look at the implications of these trends in military compensation and how the system needs to be structured to respond and stay relevant to the demographic as we move forward.”
The ALA president noted that there are many changes taking place on base with military pay “that will affect consumer behavior, and we want to make sure that we are plugged into that, and we are able to interpret and distill all of that information to provide to our member companies so that they can appreciate the evolving demographic situation and bring that into their business intelligence equation.
Personnel
Pete Hegseth was confirmed as secretary of defense in a 51-to-50, with the tiebreaking vote made by Vice President Vance.
He was pretty much voted in along partisan lines, although Rossetti noted that there were three Republican senators who voted against Hegseth’s confirmation.
“We expect that we are going to see a lot of activity now that Hegseth has gone through the Senate, so we will see action there.”
In the personnel and readiness arena, “We haven’t seen a nominee to replace Ashish Vazirani, who just left as the undersecretary for personnel and readiness,” he noted. “The only person plugged into the P&R chain of command is an ex-staffer for Sen. Ted Cruz — Mark Lewis — but he is now the acting manpower and reserve affairs chief, and the M&RA is in the chain of command for the DeCA director, so there is a person in place.
“We have not seen him nominated yet, we don’t know if he will be, but with Hegseth in place, we will see over the next couple of weeks more nominations coming forward.”
In addition, Rossetti said that nominations need to be made for the secretaries of the Army, Navy and Air Force, with those hearings being scheduled with the Senate Armed Services Committee.
Also, investment banker Stephen Feinberg has been nominated as deputy secretary of defense, and Rossetti said, “The deputy’s office has a big hand in the administration of the department where the secretary of defense is dealing with the White House and broader national security issues, like wars and deployments.
“The administrative stuff falls to the deputy and to the comptroller, so we are going to be watching Feinberg’s nomination hearings very closely to see what he has to say. He should be very keyed in on many business issues.”
On the Congressional side, it is largely intact, with the Republicans in the majority.
Rossetti said that the House Armed Services Committee has put out its subcommittee lists. Republicans Pat Fallon (Texas) will be chairing the personnel subcommittee —“which has jurisdiction and oversight over our programs” — Mike Rogers (Ala.) is chairman of the full committee, and Rob Wittman (Va.) will be the vice chairman of the HASC.
On the Senate side, Republican Roger Wicker (Miss.) is now chairman of the Senate Armed Services Committee, and the subcommittee chief for personnel is fellow Republican Tony Tuberville (Ala.).
Rossetti noted that with Republicans in the majority in Congress, it has an impact on staffing, on behavior across the board.
“They are all good people, we are looking forward to working with them, and our folks on the defense authorizing committees and Congress.”
Mitch McConnell (R-Ky.) was the minority leader in the last session, and he now has taken the position as chairman of the defense appropriations subcommittee, and on the House side, Kenneth Calvert (R-Calif.) will be leading the House appropriations subcommittee.
“We have been working with these people for a while, and I think that we will double down on our efforts with them,” Rossetti noted. … “The appropriators are going to have a big hand going forward in determining all the funding levels, but which programs and policies are going to be shaped, regardless of how the administration behaves, I think it is the appropriators that have the final say on how things take place.
“But in this dynamic environment, you never know how things are going to turn out, and we will be weighing in deeply with the appropriations committees because of their reach and … you know, in your companies, the CEO can say something, but until the comptroller writes the check, things usually don’t happen in the private sector. That is kind of the same dynamic in the federal space.”
Debt ceiling
Rossetti said that the debt ceiling has been reached, so the government is doing what they call “extraordinary measures” to keep the government funded.
“There is about six months of gas in the tank to let the government continue, probably until June, and if there is not a debt ceiling decision, things will start crashing down,” Rossetti told attendees.
“Usually they reach that, but I think it is going to be a political football, it is all going to be juxtaposed, and a lot of the things taking place in term of regular order of appropriations, and resolutions, and comment, reconciliation and all of this is a ‘giant hairball,’ and what we need to do is to unravel it, and distill it in such a way that not only do you understand what it taking place and what programs may be affected, but allowing us to go in and to make a difference in the debate.”
TARIFFS
“The key thing here is that ‘we don’t know yet,’” Rossetti told attendees. “Are they going to be across-the-board tariffs or targeted tariffs?
“Across-the-board tariffs would have an effect on consumer prices. But I can’t say right now where the administration will ultimately come down on.
“We work with the National Retail Federation (NRF), and a lot of other organizations, and we should just caution on tariffs regarding consumer pricing and consumer behavior … I am reluctant to speculate on where it will ultimately come down, but it will have an effect.”
Rossetti noted that there has been talk about rescinding the break that overseas suppliers — particularly those in China — get on their shipping costs when a product is less than $800 and is shipped directly to consumers in the U.S. These products come in duty free, “and we would like to see that removed, because I do think it skews the equation for our operations and, contrarily, makes products cheaper. It has an effect on the apparel industry.”
Compliance
Rossetti also updated attendees on ALA’s work on a platform to assist companies with compliance on governmental regulations and laws affecting the business.
“That platform is becoming even more important as policies get unraveled, associated with the transition and initiated by the transition,” he noted. “The regulatory and compliance platform will be a key going forward.”
He stated that it was going to be tested with a number of companies, “so that they could run through the compliance process,” currently, ALA has five compliance silos developed on five major issues, and there are about 20 more “in the queue” related on updates to policies that are to be finalized.
Commissary transformation
Defense Commissary Agency (DeCA) Transformation
Trying to sort out how the supply chain model should be structured; favorable pricing treatment and in-store support needs to remain intact; major technology transformation and implication to the business; DeCA funding at record levels ($1.517 billion; the system operates efficiently and evolves to keep the benefit relevant.
Exchange Performance
The Army & Air Force Exchange Service (AAFES) as a critical linchpin of the defense mission; Navy Exchange Service Command putting up excellent results; Marine Corps Exchange (MCX) excellent performance record and 2025 being the 250th anniversary of the Marine Corps; Coast Guard Exchange (CGX) experiencing positive numbers; Veterans Canteen Service (VCS) performing magnificently in ensuring that our veterans are taken care of.
Shipping and Transportation
Hearing on the Panama Canal; the neutrality act and how that juxtaposes with any Chinese presence in the canal area; what U.S. options are to ensure that the canal remains neutral and that U.S. ships have efficient transit through the canal.
Keeping the Red Sea channel open, or reopening it; major ocean carriers waiting to see if they want to transit through there; the influence of the Gaza truce on this channel to make transit safe.
Also, Food and Drug Administration (FDA) regulations and policy; and Department of Education rules — blind and other entities related to the business model for the military.
It’s very different these days
Further, the ALA president said of the organization, “we track appropriations, we track budget, we track all of these things on your behalf, and we work to influence behavior.
“The one thing to keep in mind is that the deficit is the big ‘elephant in the room.’ The last time the federal budget was balanced was under Bill Clinton, Newt Gingrich, and John Kasick did balance the budget … but then the deficits were in the $200 billion-to-$300-billion range.
“It is different now. The government is spending about $6.5 trillion and only taking in about $4.4 trillion. The Congressional Budget Office came out the other day that we are going to be looking at a $2 trillion deficit as far as the eye can see.
“I believe a lot of the budget action, the executive orders, all of this is designed to try and deal with this very serious problem, 10 times of the $200 billion deficits that we were accustomed to dealing with before.”
Rossetti noted that an overarching point he wanted to make was, “This system is critical. We are going to impress on everybody who will listen in the incoming administration and in Congress that as they look at various efficiency initiatives, the [military resale] system is an example that the government should follow in terms of how it deals with management issues and budget issues going forward.
“This system returns all of the money that it makes — especially on the exchange side — to the military. On the commissary side, a large portion of the surcharge is returned to operations, and more importantly, a large part of it even exceeds the appropriations the commissaries get is returned to the military in terms of savings.
“So if you are Elon Musk or any of the people in the Department of Government Efficiency, if you are putting things under the microscope, the message we want to get across to them is this system is pretty much a budget-neutral exercise, it is also on the plus side of the balance sheet of the government, and we are going to continue to make that argument … to make sure that we distill the argument where senior policymakers can get it and understand that this system should be replicated, not decimated, as you work through the various government efficiency initiatives. It actually returns more to the treasury than it spends.”
As perhaps the only program that does that, Rossetti said policymakers need to understand that “the foundation and nature of this business is all the good it does for so many people for so little. That is the narrative we will be constructing going forward.”
