Senator Carper Continues to Express Optimism about Postal Reform Legislation in 2014
Alliance Report 14/20
October 22, 2014
With the USPS poised to announce a large operating profit for Fiscal Year 2015, and having ended the year with $5.45 billion in cash in the Postal Service Fund on September 30 according to the Monthly Statement of the Public Debt, hopes for near-term crisis-driven major postal reform have nearly extinguished. Nevertheless, Senator Tom Carper (D-DE), chairman of the Homeland Security and Governmental Affairs Committee continues to express optimism for the lame duck session of congress following the November 4 elections. Recently, Senator Carper’s office released the following statement:
Once Congress returns in November, members will have limited time to address a long list of legislative to-dos. At the top of that list? Postal reform.
To this day – more than 200 years after its founding – the Postal Service remains an important part of our lives and economy. But it continues to face financial challenges that threaten its future. Only Congress can put the Postal Service back on solid financial footing and give it the tools it needs to innovate and grow. The bipartisan Carper-Coburn Postal Reform Act of 2014, reported out of the Senate Homeland Security and Governmental Affairs Committee earlier this year, would fix the problems ailing the American institution and enable it to thrive for years to come.
Here are the Top Ten Reasons Congress Must Act on Postal Reform:
- The Postal Service is a critical piece of our economy but its future is threatened. More than 200 years after its founding, the Postal Service remains a vital and unique part of our economy that supports millions of jobs and businesses large and small. However, due to the steady decline of First-Class mail and the rapid transition to digital communications, it is struggling to survive. For an institution that operates at the center of a $1 trillion industry and employs nearly 8 million people, collapse would cause serious harm to customers and the overall economy. The Carper-Coburn bill aims to reform and modernize the Postal Service by addressing its longstanding health care and pension issues, streamlining operations and generating additional revenue, giving it the tools it needs to survive and prosper in the years to come.
- The Postal Service continues to bleed red ink. The Postal Service’s current financial condition is dire and continues to deteriorate. It has maxed out its line of credit and defaulted three times on multi-billion dollar payments to the U.S. Treasury. The Carper-Coburn bill transforms the Postal Service’s financial forecast for the next decade. It enables the Postal Service to return to profitability; repay the $15 billion it owes to the U.S. Treasury; and largely eliminate its $45 billion liability for retiree health care.
- The Postal Service has been forced to make cuts to costs and services to address its financial challenges. For years, the Postal Service has right-sized its enterprise to address its financial challenges and adapt to a digital age. It keeps prices as low as possible, reduces its fixed costs, and continues to raise revenue where it can. Its workforce has been reduced through attrition from 788,000 to 491,000 since 2000. Nearly 300 mail processing facilities have been closed since 2006, cutting the number of such facilities in half. Nearly 16,000 post offices have had their operating hours cut. But it’s likely more cuts – that hurt service quality – will happen if Congress fails to act.
- Moratoriums on plant and facility closings without other reforms would cost the Postal Service billions. The Postal Service plans on closing or consolidating 82 mail processing facilities in 39 states. In response, many members of Congress suggest a short-term moratorium on closures. Such a move would only delay the problem and likely force the Postal Service to make painful cuts elsewhere. In fact, a moratorium, in the absence of congressional reform, would further drain the Postal Services resources without giving it any additional authority to cut costs or increase revenue, increasing the risk of a congressional bailout. The Carper-Coburn bill prohibits the Postal Service from closing or consolidating mail processing facilities for a period of two years from the date of enactment. In addition, the Postal Service would have to take certain procedural steps before closing or consolidating a plant in the future, and those served by a postal facility could appeal the decision to close or consolidate the facility to the Postal Regulatory Commission.
- The Postal Service overpays billions into its retiree health pre-funding schedule. The Carper-Coburn bill allows the Postal Service to only pay what it owes for its pensions, and get the money back that it overpaid into the federal systems, specifically the Federal Employees Retirement System (FERS) for federal employees hired after 1984. It restructures the Postal Service’s retiree health pre-funding schedule and eliminates the existing statutory schedule of payments, allowing the Postal Service to reduce its financial burden and make payments that better reflect the demographics of postal employees.
- The Postal Service needs a more efficient health care system that takes full advantage of Medicare. The Postal Service pays more money into Medicare than any other employer in America, but its retirees don’t take full advantage of it. The Carper-Coburn bill creates a new Postal Service Health Benefits Program within the Federal Employees Health Benefits Program. This new program covers all postal employees and annuitants and requires Medicare- eligible annuitants enrolled in the program to also enroll in Medicare parts A, B and D.
- The Postal Service needs to be able to innovate in order to thrive in the 21st century. Today, despite its financial challenges, the Postal Service is showing itself to be quite innovative and finding ways to remain relevant. It’s partnering with Amazon.com to delivery groceries in some communities and delivery packages overnight in a growing number of zip codes – including on Sundays. It’s helping UPS, FedEx, and other private shippers to grow their businesses by taking packages the last mile. It’s also experimenting in the digital world in cutting-edge areas like identity verification. However, it needs the tools provided by the Carper-Coburn bill to give it the freedom and flexibility it needs pursue these opportunities and to act more like its own business. The bill allows the Postal Service to innovate and explore ways to make money in the digital age by adapting its unique 200-year-old distribution network. It establishes a short-term Strategic Advisory Commission of outside experts and innovators to explore new business models for the Postal Service, and identify ways to increase revenues and reduce costs. In addition, the legislation establishes a permanent Chief Innovation Officer to help serve as a change agent within the Postal Service.
- The Postal Service needs the capital to make investments. By addressing longstanding health care and pension issues that have cost the Postal Service billions, the Carper-Coburn bill frees up $30 billion so the Postal Service can make the capital investments necessary to compete in the coming years. Those investments include replacing its aging vehicle fleet with 191,000 fuel efficient vehicles sized appropriately to delivery packages and innovative services like groceries, rehabbing its mail processing plants so that they are more capable of handling growing package volume; and updating technology and customer service standards in its retail outlets.
- The Postal Service must offer new competitive products to compete. The Carper-Coburn bill allows the Postal Service to take on a more competitive business model; allowing it to offer new products not directly related to hard-copy mail and to deliver wine, beer, and liquor. The bill provides the Postal Service greater flexibility to set prices for its products, something essential for any business. It also allows the Postal Service to offer services on behalf of other federal, state and local agencies, like passports and hunting and fishing licenses.
- The Postal Service current rate system is conditional and creates uncertainty for businesses and customers. Under current law, the emergency rate increase that went into effect earlier this year will likely go away sometime in 2015. In addition, the Postal Service is forced to go to the Postal Regulatory Commission to seek approval for most price changes through a time- consuming process. The Carper-Coburn bill would prevent the upcoming price reduction in recognition of the continuing financial challenges the Postal Service faces and give its Board of Governors more say in pricing matters.
For more information on the Carper-Coburn Postal Reform Act of 2014, please visit “Reforming the Postal Service.”
The Alliance of Nonprofit Mailers agrees with most of these “top ten reasons,” but disagrees with the prescription recommended in #10. The price cap regulation that was mandated in 2006 replaced a cost of service regulatory structure that enforced little financial discipline on the USPS. As a legal government monopoly with no shareholders and no direct competitors to its market dominant mail services, the price cap based on the All-Urban Consumer Price Index (CPI-U) is one of the best things that has happened to the USPS. And the Postal Regulatory Commission (PRC) has done an outstanding job implementing a streamlined regulatory approval process that enables USPS to make the regular, predictable annual rate changes that help customers to plan ahead and continue to use mail as an affordable, reliable service. Postal Service leadership is rightfully proud of the mostly smooth and well-planned cost reductions it has implemented since 2006 as necessary adjustments to the return of mail volumes to the levels of the 1980s. Removing the best regulatory improvement now is not a solution.