Financial Condition of the Postal Service The Quest for Solvency
Today’s Full Committee hearing of the House Committee on Oversight and Reform regarding the financial condition of the Postal Service was a serious reminder of the need for bi-partisan Postal Reform. Postmaster General Brennan, other witnesses and Committee members discussed how the Postal Service got to the brink of liquidity and what should be done to return them to solvency.
As all of you reading this probably know, the Postal Service has been losing billions of dollars since the Postal Accountability and Enhancement Act (H.R. 6407) Act of 2006 was signed into law – the legislation held most to blame for the Postal Service’s downward spiral. The most costly part of the legislation is retiree health benefits. Unlike private sector companies and nearly all federal agencies, the Postal Service must pre-fund retiree health benefits – benefits that will not be paid out until sometime in the future. This mandated cost represents a more than $5 billion a year expense. In fact, eighty percent of the Postal Service’s net losses are the mandated costs imposed by Congress in the 2006 Act.
So what’s the plan today? Funny you should ask. During the hearing, Representative scolded Brennan for failing on her promise to deliver a Business Plan earlier this year. He reminded Brennan that he has worked in good faith on the USPS’ behalf and that her delay is causing a real issue for the American people. He also reminded Brennan that Congress already rejected lifting the pre-funding burden, and she should just keep it out of her plan. On the other side of the aisle and targeting pre-funding specifically, Representative Occasio-Cortez blamed Congress for causing the Postal Service’s financial problem when they imposed the legislation back in 2006. Heck, even Joel Quadracci would be out of business if he had to pre-fund his employee’s retiree health benefits at Quad. Postmaster Brennan reported that eliminating the pre-funding burden would by itself represent a $3 billion savings per year. Would that correct an error made 13 years ago?
Let’s not forget the Board of Governors. Much like a board of directors of a publicly held corporation, the governors watch over things. They even select the Postmaster General. There should be 11 governors including Postmaster General Brennan and Deputy Postmaster General Ron Stroman. The other nine are independent governors appointed by the President and approved by the Senate. The USPS has 4, including Brennan and Stoman. Representative Lawrence weighed at the hearing to remind Congress there must be a Board of Governors by statute, and if you want to hold the USPS accountable get a Board.
Then there is privatization. Some support it, especially if they might directly benefit from it. They go so far as to say it is inevitable. If the Postal Service is privatized, however, most of what is in the bill would still have to be done, and the first thing to go would be pre-funding.
What the USPS needs is legislative Reform. Without it, Postmaster General Brennan says they will be out of cash by 2024. In her quest for solvency, Brennan is in the final validation stage of her business plan. The committee will expect a final copy around July 7, 2019 (that date will be firmed up later today). You can be sure that the Plan will include the need for legislative items like Medicare integration and re-amortization of retiree health benefits funding; pricing and product flexibility including restoration of half the exigent pricing and elimination of the price cap; and, yes, 5-day delivery, but not for packages. The Committee will have 5 days to submit additional questions. In the meantime, expect a vote on two more Board nominees as well as another meeting of the House Committee later this year the review the USPS Business Plan as the quest to bring the USPS back from the brink of liquidity continues.