House and Senate Proposals Differ in How to Keep Postal Service Viable

Dec 1, 2011

By Chris Wilkerson, staff writer – November 2, 2011

There are new rumblings that the United States Postal Service is driving its mail truck toward a financial cliff and the U.S. Congress is pushing bills forward that might slow the truck down or even steer it toward safety.

The U.S. House and Senate are considering separate bills that promise to save the USPS about $20 billion a year. The House version has been heavily criticized by the postal union and was voted on mostly along party lines. The Senate version is being touted as more bipartisan, but lacks the teeth of the House bill.

Both bills address the USPS’ employee count. There are about 550,000 postal service employees. The consensus on Capitol Hill is that the USPS could reduce its staff by at least 100,000 in early retirement offerings or buyouts to those already eligible to retire.

Each bill proposes to pay for those buyouts in different ways. The Senate’s proposal would reduce the workforce by getting a repayment from the Office of Personnel Management because of a $7 billion overpayment. This reduction would save the USPS about $8 billion a year. [1] House Republicans call the overpayment fix a “gimmick” and insist that it is the same as a bailout.

A House committee passed the Issa-Ross Bill, H.R. 2309, in October. The House bill includes proposals that would modernize the USPS, an organization that has been around since the 18th century. But more controversially, the Issa-Ross Bill also would create an authority to take over the USPS if it cannot pay its bills.

The authority would have the power to make dramatic cost-cutting policy changes. “The solvency authority will also have the ability to remove postal workers from the expensive federal workers’ compensation system to be placed in their own,” according to a press release from Rep. Darrell Issa’s office. [2]

Another key difference between the Issa-Ross Bill and the Senate’s Postal Service Act is the fate of six-day delivery. The House bill would give the USPS the option to eliminate Saturday delivery quoting a public opinion poll that indicated most people would be fine with five-day delivery if it meant the USPS would be in a better place financially. Eliminating Saturday service could save the USPS about $3 billion a year.

The Senate bill would make five-day delivery a last resort. The committee heard from industries that say they need the USPS’ six-day delivery, such as printing businesses, catalog companies and the paper industry. The Senate’s proposal gives those companies at least two years to develop new business strategies and “…develop remedies for customers who may be affected disproportionately by the change in service.” [3]

How bad is the Postal Service’s economic crisis? The House Committee on Oversight and Government Reform says the USPS lost about $10 billion last year. The company is losing customers fast too. Mail volume is down about 20 percent over the past five years, according to the committee. [4]

The USPS was supposed to make a $5.5 billion payment to its retiree health benefit plan in November, but it did not have the money. A 2006 law aimed at saving the Postal Service from financial ruin requires the USPS to pre-fund the retiree health benefit instead of the previous, pay-as-you-go method. Saving money by pre-funding retiree health care plans is showing signs of working by reducing the USPS’ unfunded obligations, according to a report from [5]

The postal unions have opposed pre-funding retiree health benefits. The union’s stance is that the 2006 law requires the USPS to overfund the retiree health benefit, making it a burden no other federal agency has to bear and causing undue financial hardships. [6]

AFL-CIO blogger James Parks put it this way, “All of the USPS’ losses over the past four years come from this mandate. You cannot find another organization in the world…that pre-funds 75 years of benefits over a 10-year period. And it’s not just the overpayments, it’s the opportunity costs of having to hold that much reserve capital that cannot be used when times are tough, or to invest in more attractive services.” [7]

But Issa told CNBC in October, “The non-partisan Congressional Research Service recently found that pre-funding requirements match Congress’ intent when they were enacted in 2006. The intent is to ensure that the growing unfunded liability for retiree health care for current employees is covered.”

The Senate plan suggests recalibrating the retiree health benefit plan pre-funding by stretching it out over a longer period of time.

The American Postal Workers Union and the National Postal Mail Handlers Union took their disdain for the Issa-Ross Bill an extra step by running national television ads indicating that the House bill would force the USPS to fire “…thousands of military veterans.” The ads ran on CNN, MSNBC and FOX News for a week. [8]

The union TV ads also warned viewers that postal service finance solutions include discussions of shutting down post offices.

The USPS operates about 31,000 post offices across the country – that’s more retail outlets than McDonalds, Walmart and Starbucks combined. About 3,500 post offices are on a watch list. Closing post offices can save the USPS money but how much depends on which offices.

Postmaster General Patrick Donahoe has said it will take cutting the workforce, cutting the workweek and closing offices to bring the USPS back to solvency. In an interview with Time Magazine, he said, “…if you’re spending $70,000 to operate a place that’s bringing in $10,000, there have to be some other solutions.”

The USPS is analyzing two groups of post offices, rural ones that only keep workers busy for an hour or two a day and urban offices that make less than $500,000 a year with other offices nearby, he told Time Magazine in November. [9] According to the magazine, some mail delivery still has to happen by mule, snowmobile and john boat in some parts of the country.

The House’s Issa-Ross Bill would empanel a task force to look at office consolidation in hopes of saving about $3 billion a year. Ultimately, Congress is trying to find a way to cut the USPS’ budget by about $10 billion a year. That will inevitably require some tough decisions by Congress, some concessions by the unions and a radical restructuring of a company mandated by the Constitution to deliver mail all over the United States.










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