Legislative Update: Emergency Hearing Vets Salvage Plans for U.S. Postal Service

Issue

The U.S. Senate Committee on Homeland Security and Governmental Affairs held a hearing on Tuesday, Sept. 6 entitled, “U.S. Postal Service in Crisis: Proposals to Prevent a Postal Shutdown.” The committee met with the purpose of vetting the various proposals which attempt to reform and restructure the United States Postal Service (USPS). The U.S. Postmaster General testified that unless given immediate relief by September 30, the USPS will default on its payment to the Federal Government Retiree Fund, and as early as August of 2012, will cease to operate in its current manner. With the USPS serving as the United States’ second largest employer, after Wal-Mart, Congress is finally addressing the economic impact of a USPS collapse.

Background

The USPS has been in serious financial trouble since the federal government cut funding for the organization in the 1970’s, yet kept much of the stringent oversight authority, as well as continued to require the organization’s participation in onerous federal retiree and health plans. Although not supported by federal tax dollars, the organization is still heavily regulated by Congress and unable to create their own business plan and react to market trends like FedEx and UPS. Without Congressional approval, the USPS cannot change postage rates, make changes to the employees’ retirement or healthcare funds, or reduce delivery times and days. Current mandates also require the USPS to make pre-payments on retiree health benefits each year, which cost the organization about $5.5 billion annually. When private companies experience consecutive loss years, they are able to hedge their investments to obtain liquidity and invigorate their roles in the market. Again, the USPS’ hands are tied in this scenario. One of, if not the largest investment of the USPS is their contribution to the Civil Service and Federal Employee Retirement Systems. The USPS has requested access to the Civil Service Retirement System and the Federal Employee Retirement System for a return of overpayments USPS made, which are estimated at almost $7 billion. Until now, Congress has opposed the release of these overpayments back to the USPS.

Critics believe that the only way the United States Postal Service can survive is to either be funded by Congress or be allowed to operate as a private enterprise. There are several pieces of legislation that have been introduced in the House and Senate to make changes to the USPS but none with the momentum that calls for complete Congressional autonomy. Here are the three legislative measures:

H.R. 2309 – The Postal Reform Act of 2011, sponsored by Rep. Darrel Issa- creates a BRAC-like commission to reform the USPS.

S. 1010 - Postal Operations Sustainment and Transformation Act of 2011, sponsored by Senator Thomas Carper – looks to give the USPS the authority to make business model changes such as reduction in service, closure of post offices and layoffs.

S. 353 – The Postal Service Improvements Act of 2011, sponsored by Senator Susan Collins – creates a commission to look into the retirement and health program costs, as well as the restructuring of the USPS contracting procedures. It does not look to reduce service for fear of the impact to rural and remote locations.

Although H.R. 2309 calls for a USPS-BRAC to transition postal worker benefits to that of the regular federal benefits, only S. 1010 and S. 353 call for the return of the USPS’ $7 billion in overpayments into that system.  

Status