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Senate Postal Reform: A Lot of Money, Little Change

Posted By James Gattuso On November 7, 2011 @ 5:15 pm In Featured | Comments Disabled

With nine days to go before the U.S. Postal Service (USPS) faces default, a Senate committee on Wednesday is expected to vote on a new plan to address the crisis. The plan takes a few steps in the right direction, but it falls short of the comprehensive reform that is needed.

The immediate problem for USPS is a $5.5 billion payment to the federal treasury to fund retiree health benefits that is due on November 18, and it doesn’t have the money to pay. But USPS’s problem is much deeper [1] than a cash-flow hiccup: in the face of plummeting mail volumes, USPS is losing money at an accelerating rate. Without comprehensive reform, it will fail, potentially saddling taxpayers with billions in costs annually.

On Wednesday, the Senate Homeland Security and Government Reform committee is expected to vote on a package of reforms (S. 1789) sponsored by a bipartisan group of Senators led by Joe Lieberman (I–CT), the committee’s chairman. The plan would allow the postal service to save money by replacing door-to-door service with curbside deliveries, requiring labor arbitrators to consider the financial state of USPS in their rulings, lifting the ban on delivery of wine and beer, and reducing worker compensation costs.

But the Senators balked on many of the key big-ticket reforms that USPS management had urgently requested. Saturday delivery of mail will still be mandated (at least for two years), blocking billions in possible savings. USPS is permitted to close processing facilities but only after lengthy procedures are followed. The workforce would be trimmed by 100,000, less than the 220,000 sought by USPS.

The legislation would also provide USPS billions in cash from taxpayers. Specifically, it would hand over some $7 billion in supposedly “surplus” contributions the government has made to the Federal Employees Retirement System. Such temporary surpluses, however, are common and are typically erased by normal financial swings or amortization over time. Transfer of the entire pot to USPS leaves taxpayers vulnerable if USPS later falls behind (which, given its condition, is not unlikely) while allowing needed structural reforms to be delayed.

Meanwhile, the $5.5 billion payment due to Treasury on the 18th for retiree health care benefits is tucked under the rug. The bill replaces the current 10-year amortization schedule with a 40-year payment period.

USPS, and mail delivery itself, faces an uncertain future. Comprehensive change is needed to prevent massive losses and virtual bankruptcy. The reforms being considered by the Senate, however, fall short—while putting taxpayers even more at risk for the consequences of failure.


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URL to article: http://blog.heritage.org/2011/11/07/senate-postal-reform-a-lot-of-money-little-change/

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[1] much deeper: http://www.heritage.org/Research/Reports/2011/09/Youve-Got-No-Mail-Is-the-End-Near-for-the-Postal-Service

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