USPS at a crossroads

Getty Images

Congress probably won’t produce much in the way of legislation in this election year, but one item that might well make it to President Obama’s desk is a postal reform measure.

Congress realizes the situation is dire and is coalescing around legislation introduced by Sen. Tom Carper (D-Del.)

ADVERTISEMENT
There is no question about the urgency.

The Postal Service lost $5.1 billion last year, its ninth straight year of multi-billion-dollar losses. Since 2007, it has rung up more than $51 billion in losses and used up a $15 billion line of credit from the U.S. Treasury. It delivers as many packages each year as Fed-Ex but receives half the revenues.

It has cut a third of its workforce since 2010 and closed half of its 600 mail distribution centers. Volume of its most profitable product – first-class mail – is down 35 percent in a decade. Its unfunded pension liability – what it owes the fund that pays retirees – now exceeds $55 billion.

As James Millstein, a restructuring specialist and former Treasury Department official now looking into the Postal Service said, if the Postal Service were a private company, “it would undoubtedly be viewed as insolvent.” 

To address this, Carper, ranking member of the Senate Committee on Homeland Security and Government Affairs, has introduced iPOST – the Improving Postal Operations Service and Transparency Act of 2015.

The plan would, Carper said, “pave a fiscally sustainable path that will enable this American institution to thrive.”

That remains to be seen, of course. But it does address what Postal Service leaders believe to be their biggest roadblock – how to pay for health and retirement benefits for its 300,000-odd employees.

The legislation would create a Postal Service Health Benefits Program within the Federal Employees Health Benefits Program that serves Congress and much of Washington. All employees in the new plan also would be enrolled in parts A, B and D of Medicare. The Postal Service pays more into the fund that supports Medicare than any other agency, but postal employees cannot now fully access it.

iPOST would eliminate the requirement that the Postal Service prefund its retirement benefits and cancel any outstanding payments. It also would require the Postal Service fund only 80 percent of its expected retirement costs and allow it to amortize payments over 40 years.

The Postal Service has not made a payment into the prefunding account since 2009, and the amount it annually defaults on is about $5.7 billion – or slightly more than the amount it finished in the red. Carper said these changes will save the Postal Service $32 billion over 10 years.

The legislation would make permanent the 2-year-old “exigent” rate increase the Postal Service was granted so it could get through the recession – to the surprise of no one. Otherwise, it will end in April, costing the Postal Service $2 billion per year.

For years, the Postal Service has been the most popular federal agency, with approval ratings in the 70s even in the last three years. But satisfaction with government fell to an all-time low this year, and slippage by the Postal Service was a big reason.

The Postal Service relaxed on-time delivery standards significantly in recent years – virtually no one can get a letter delivered anywhere overnight – and has since failed at unprecedented levels to meet those relaxed standards, particularly in rural areas.

Carper’s legislation responds to this by both freezing rates (beyond allowing the ‘exigent’ increase to become permanent) till at least 2018 and pausing the closing and consolidation of mail processing plants for two years and post offices for five. These initiatives focus appropriately on improving service for the Post Office’s core and monopoly-protected function of delivering mail to Americans’ homes.

Another proposal – to deliver beer, wine and spirits through the mail – does not. Moreover, it incurs unneeded risk for the government and infringes on a market more than adequately served by commercial shippers.

The Postal Service is at a crossroads. It has a monopoly on delivery of regular and first-class mail – it alone can put something into a mailbox. This is both its most profitable product and the one least sensitive to price increases. And although volume has fallen, the decreases appear to have leveled off and there are some indications it may start to rise again. And 55 billion pieces of mail a year still represents a substantial business.

But its cuts seem always to come on the monopoly side – the side all Americans depend on to stay connected to the outside world. At the same time it was pushing to cut Saturday delivery, it sought to add Sunday delivery for its businesses that compete with private-sector shippers, such as Fed-Ex and UPS. And its big-ticket items – the 180,000 trucks it plans to buy for $6.3 billion – all are driven by the businesses that must compete.

Carper is right to address the Postal Service’s health insurance and retiree financing problems. He is right to insist on better performance and more transparency – the agency’s Inspector General says its financial reports are so confusing nobody can tell for sure what shape the Postal Service is in fiscally.

But he needs to resist calls from lobbyists to grow the mission of this struggling agency and ensure it has the resources and people it needs to deliver our mail six days a week.

McNicoll is a conservative columnist and freelance writer based in Alexandria, Virginia. He is a former senior writer for The Heritage Foundation and former director of communications for the House Committee on Oversight and Government Reform.