Can Lawmakers Agree on Postal Reform?

The Postal Service has been losing money in recent years and has needed to cut back on services and raise stamp prices. However, these latest reductions are setting off a squabble among lawmakers. After USPS announced plans to consolidate 82 mail processing centers in 2015 and shed 15,000 jobs, 50 mostly Democratic senators sent a letter to the Senate Appropriations Committee and Financial Services and General Government Subcommittee chairs and ranking members asking them to postpone the reductions for one year and return mail delivery standards back to where they were in July 2012 to buy time for postal reform. Senate Homeland Security and Government Committee Chairman Tom Carper (D-DE) responded with a statement arguing that the best way to address these concerns would be for Congress to enact reforms to fix the financial challenges facing the Postal Service. But are lawmakers close to an agreement?

The answer is unclear. Both the House and Senate have produced bills with similar elements, but they have different emphases when it comes to stemming USPS's flow of red ink.

When it comes to similarities, both bills would:

  • Save $17 billion over ten years
  • Permit the USPS to skip required premium contributions to the Federal Employee Health Benefits (FEHB) program in 2015 and 2016, instead having those payments covered by the Postal Service Retiree Health Benefits Fund (PSRHBF)
  • Accelerate the date at which USPS must make payments to the PSRHBF to close its unfunded liability (although the details differ)
  • Allow the USPS to move to a five-day delivery week (although only if mail volume drops below 140 billion pieces per year in the Senate version)
  • Increase the use of curbside and centralized delivery (albeit only for businesses in the Senate version)
  • Use Postal Service-specific data to calculate employee retirement benefits

However, there are many differences in the two bills as well. The House bill from Oversight and Government Reform Committee Chairman Darrell Issa (R-CA), which we discussed in June, places more emphasis on policies that reduce operation costs, such as reducing health and life insurance premium contributions ($2 billion) and eliminating appropriations for free and reduced-rate mail (almost $1 billion). It also gets $5 billion more in savings from the delivery changes that are common to both bills and continues to require the USPS to close its unfunded liability in the PSRHBF.

By contrast, Carper's Senate bill would lean more heavily on making permanent a 4.3 percent stamp price increase in effect for 2014-2015, which would raise nearly $16 billion, instead of undertaking the policies described in the previous paragraph. Unlike the House bill, it would allow the USPS to close only 80 percent of the PSRHBF unfunded liability, and it would require the Postal Service to maintain delivery service standards and postal facilities as they were on October 1, 2013, for two years. In addition, the Senate bill would establish a Postal Service Health Benefits Program in which employees and annuitants could enroll (annuitants who applied would then be enrolled in Medicare), and it would transfer a $2.4 billion of surplus Postal Service retirement contributions to the Postal Service. Finally, the bill would require the USPS to prefund 80 percent of its workers' compensation liability starting in 2019.

The table below compares the 2015-2024 deficit impacts of the provisions in the House and Senate postal reform bills. Although the bills both have net savings of $17 billion, the Senate bill has a larger impact on each side of the budget since more money is shifted from off-budget to on-budget.

2015-2014 Deficit Effect of Postal Reform Bills (billions)
Provision House   Senate
  On-Budget USPS Unified   On-Budget USPS Unified
Move to Five-Day Delivery $0 -$11 -$11   $0 -$8.5 -$8.5
Increase Curbside and Centralized Delivery $0 -$8.1 -$8.1   $0 -$5.4 -$5.4
Limit Postal Contributions for Life and Health Insurance Premiums $0 -$1.9 -$1.9   - - -
Use Postal-Specific Data for Retirement Benefits $3.2 -$1.6 $1.6   $3.5 -$1.7 $1.7
Increase Rates on Alaska Bypass Mail $0 -$0.2 -$0.2   - - -
Re-configure USPS Payments for Retiree Health Benefits $3.5 -$1.7 $1.7   $10.8 -$5.4 $5.4
Eliminate Annual Appropriations for Free and Reduced-Rate Mail $0 -$0.8 -$0.8   - - -
Extend 4.3% Stamp Rate Increase - - -   $0 -$15.7 -$15.7
Prefund Workers' Compensation - - -   -$3.2 $2.6 -$0.6
Transfer Surplus Postal Retirement Contributions to USPS - - -   $2.4 -$2.4 $0.0
Temporarily Prohibit Closing Mail Processing Facilities or Reducing Service - - -   $0 $1.4 $1.4
Establish Postal Service Health Benefits Program - - -   $5.3 -$0.5 $4.8
Expedite Sales of Federal Property - - -   <$0.1 $0 <$0.1
Total  $6.6 -$23.6 -$17.0   $18.8 -$35.7 -$16.8

Source: CBO
Negative numbers denote deficit reduction. Numbers may not add to totals due to rounding.

A compromise certainly seems achievable, but it will take some work. First, the House and Senate will need to pass their respective bills, which have not yet been considered by the full chamber. Once they pass, the two sides will have to reconcile the differences by compromising. It won't be easy but waiting to enact reforms as the USPS continues to lose money is not the answer.