Congress Takes on Postal Service Reform

Subsection of Annual Privatization Report 2013: Federal Government Privatization

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Congress Takes on Postal Service Reform-Again

By Adam Summers

The Postal Service continued to struggle with severe financial problems in 2012, and 2013 does not look set to be any brighter. The last Congress attempted to tackle the issue of postal reform, but was unable to reach an agreement.

During the 2012 fiscal year, the Postal Service lost nearly $16 billion, including defaulting on $11.1 billion in mandated payments to the U.S. Treasury for its contributions to future retirees’ health care benefits for the past two years. It also maxed out its $15 billion borrowing limit with the government. Even if it skips its retiree health care contribution again this year, it is expected to run out of cash in October 2013.

According to the USPS, First-Class Mail volume has dropped by 29 percent in just the past five years (see Figure 1)1, and even steeper declines are expected over the next decade, as e-mail, online bill payment, text messaging, the use of online social media such as Facebook, voice communication via cell phones, e-filing of tax returns, and e-vite invitation services continue to gain in popularity at the expense of written communication. Without reform, the agency estimates that annual losses will grow to $18.2 billion by 2015, with a total accumulated debt of $92 billion by 2016.2

First-Class Mail Volume, 1926-2012

In an attempt to improve its financial fortunes, the Postal Service has been implementing a reform and restructuring plan, although it has been frustrated by a lack of congressional approval for some measures, such as the closure or consolidation of post offices and mail-processing centers, which is often politically unpopular in representatives’ home districts. In February 2012, USPS issued a revised five-year business plan that called for a number of reforms:

  • Closing up to 3,800 post offices and 223 mail-processing centers;
  • Increasing First-Class Mail postage from 45 cents to 50 cents (an 11% increase);
  • Reducing the delivery schedule from six days a week to five (eliminating Saturday delivery);
  • Reducing overnight delivery to a 2-3 day delivery standard (depending on the destination’s distance from the mail’s origin);
  • Eliminating annual retiree health-care prepayments of approximately $5.5 billion;
  • Shifting from current federal health benefits programs, which “exceed [the] private sector comparability standard in terms of cost and coverage” (see p. 15 of the five-year business plan) to a more flexible, tiered program to be run directly by USPS; and
  • Transitioning older employees to Medicare.3

About half of the USPS plan required approval from Congress before it could be implemented. Postmaster General Patrick Donahoe cautioned that if Congress did not provide USPS the flexibility to implement its proposed reforms the Postal Service “[risks] becoming a significant burden to the American taxpayer.”4 Nevertheless, Congress remained deadlocked on competing reform proposals last year. In April 2012, the Senate passed S. 1789, a postal reform bill that would have reduced the amount of payments currently required to pre-fund retiree health-care payments by $23 billion over a number of years, increased the USPS’s borrowing authority from the U.S. Treasury from $15 billion to $26 billion, postponed the elimination of Saturday mail delivery for two years, reduced the number of mail processing centers slated to be closed to about half the number (from 252 to 125) proposed by the Postal Service, reduced workers’ compensation benefits, and offered retirement incentives to postal employees.

Rep. Darrell Issa (R-Calif.), chairman of the House Committee on Oversight and Government Reform derided the Senate bill as “A $33 billion taxpayer funded bailout” and “a special interest spending binge” that, he argued, would not save the USPS from financial collapse but merely postpone such a calamity for a couple of years at best.5 Issa and Rep. Dennis Ross (R-Fla.) co-sponsored their own postal reform measure, H.R. 2309, which would have established a five-member board empowered to override union collective bargaining agreements to lay off workers and reduce wage and benefits levels. The measure would also have boosted the Postal Service’s borrowing limit by $10 billion, permitted the USPS to go to 5-day-per-week delivery, phased in the use of cluster boxes in place of individual mail boxes, allowed for the sale of advertising on USPS vehicles and facilities, and recommended $2 billion in savings from processing center closures and consolidations and an additional $1 billion in savings from post office closures. The House never took up the Senate bill and H.R. 2309 never made it to a floor vote.

The lack of congressional action on postal reform legislation prompted the USPS Board of Governors to direct the Postal Service to accelerate its cost-cutting and restructuring programs. The Postal Service has already cut about 60,000 full-time jobs, and in January 2013 about 5 percent of its remaining 525,000 workers accepted an early retirement incentive package.6

By February 2013 the Postal Service apparently felt it could wait no longer for Congress to implement the significant changes needed, and so it unilaterally decided that it would end Saturday mail delivery beginning in August 2013. Saturday package and P.O. Box mail will not be affected, however, and post offices currently open on Saturdays will remain so. The move is expected to save $2 billion a year.7 The USPS’s announcement drew angry rebukes from some in Congress, who claim that the Postal Service has no authority to eliminate Saturday mail delivery without congressional approval, while other members were supportive and still others seemed quietly resigned to the necessity of it.8

Work on a postal reform bill in the current Congress may be complicated by personnel changes, especially in the Senate, where three of the four sponsors of S. 1789 are no longer around. Joseph Lieberman (I-CT) retired, Scott Brown (R-MA) lost his re-election bid, and Susan Collins (R-ME) is no longer on the Committee on Homeland Security and Governmental Affairs, which is the first to take up such legislation. The remaining sponsor, Sen. Tom Carper (D-DE), has replaced Lieberman as Homeland Security and Governmental Affairs Committee chairman and is expected to drive postal reform efforts in the Senate. Further confounding postal reform efforts is the focus of politicians on the upcoming high-profile “fiscal cliff” sequestration and debt ceiling debates.

Despite Congress’s failure to reach agreement on postal reform, there has been no shortage of ideas on how to go about fixing the Postal Service. A November 2012 Government Accountability Office report recommends that the Postal Service expand its use of contract postal units operating within private businesses. According to the report, these arrangements offer consumers greater convenience because of the additional locations and increased hours of operation. At a time when many traditional post offices are being closed or having their hours cut, contract postal units are open an average of 54 hours a week, compared to just 41 hours a week at post offices.9

In addition, contract postal units are significantly more cost-efficient. During fiscal year 2011, contract postal units incurred $0.17 in costs for each dollar of revenue earned, compared to $0.51 cents in costs for each dollar earned by post offices.10

Some conservatives would like to go even further in terms of privatization of the Postal Service. And the National Academy of Public Administration is currently analyzing a proposal that calls for shifting to a public-private hybrid delivery model, whereby Postal Service employees would still handle the “last mile” delivery to people’s mail boxes and doorsteps but all other aspects of the mail system-including mail pickup, sorting and processing, and transport-would be handled by private companies. The study is being funded by Pitney Bowes, which already contracts with the Postal Service for some of its services.

During the 1980s, the Reagan administration proposed privatizing the Postal Service. A generation later, the increasing red ink and dire financial prospects for the agency make it more likely than ever that significant reform may be on the way. While the current makeup of Congress makes it unlikely that full privatization of the Postal Service will be implemented, fiscal pressures and the prospect of drastically reduced service levels may make partial privatization more realistic. Regardless of the ultimate solution, postal reform looks to be a major issue in 2013, and perhaps for years to come.

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1 United States Postal Service, “First-Class Mail Volume Since 1926,” last updated December 2012, (retrieved January 29, 2013).

2 United States Postal Service, “New business plan charts path to financial stability,” Release No. 12-029, February 12, 2012, (retrieved January 29, 2013).

3 United States Postal Service, “Plan to Profitability: 5 Year Business Plan,” February 16, 2012, (retrieved January 29, 2013).

4 United States Postal Service, “New business plan charts path to financial stability.”

5 John Parkinson, “Senate Passes Postal Reform,” ABC News, April 25, 2012, (retrieved February 1, 2013).

6 Angela Greiling Keane and Kathleen Hunter, “Postal Delay in Congress Hastens Risk of Mail Stoppage,” Bloomberg, January 15, 2013, (retrieved February 2, 2013).

7 United States Postal Service, “Postal Service Announces New Delivery Schedule,” February 6, 2013, February 10, 2013).

8 William Browning, “As USPS Cuts Saturdays, Congress Reacts Swift and Strong,” Yahoo! News, February 7, 2013, (retrieved February 10, 2013).

9 U.S. Government Accountability Office, “Contract Postal Units: Analysis of Location, Service, and Financial Characteristics,” Report No. GAO-13-41, November 2012, p. 17, (retrieved February 2, 2013).

10 Ibid., p. 8.