House passes smaller USPS reform bill to eliminate pre-funding benefits

After years of broader postal reform bills failing to pass, the House passed a measure Wednesday to repeal the Postal Service’s mandate to pre-fund health care benefits for future retirees.

The USPS Fairness Act, introduced last May by House Transportation and Infrastructure Committee Chair Peter DeFazio (D-Ore.), would undo the pre-funding requirement at the heart of the 2006 Postal Accountability and Enhancement Act that has accelerated the Postal Service’s financial losses.

“The unreasonable pre-funding mandate has threatened the survival of the USPS and placed its vital services for the millions who rely on it at risk,” DeFazio said following the 309-106 floor vote.

If passed by the Senate and signed by the president, the bill would move the Postal Service to a pay-as-you-go model that’s similar to how other federal agencies and businesses fund their retirement benefits. USPS would switch over to the pay-as-you-go-model after using the money saved in its Retiree Health Benefits Fund.

A USPS spokesperson told Federal News Network that the bill, which would also forgive all the pre-funding payments the agency has defaulted on over the past few years, would “improve our balance sheet and reduce our future reported losses.”

“The Postal Service believes H.R. 2382 would be an important part of the legislative and regulatory changes – along with substantial self-help efforts by the Postal Service – that are necessary to secure our long-term financial stability,” the spokesperson said in an emailed statement. “However, by itself, it would neither reduce the underlying RHB liability nor improve our cash flow or long-term financial position.  Most importantly, the bill would not impact the liquidity crisis that we will be facing in the next few years – a crisis that will literally threaten our ability to deliver the mail. “

Outgoing Postmaster General Megan Brennan warned Congress last spring that USPS would run out of cash by 2024 absent legislative and regulatory reform

According to the five-year strategic plan the Postal Service released last month, ending the past 13 years in the red has resulted in nearly a $78 billion loss for the agency. Pre-funding retiree health benefits accounts for nearly three-quarters of those losses.

However, unlike most of the postal reform bills introduced in the House and Senate in recent years, the one-page USPS Fairness Act wouldn’t require future postal retirees to enroll in Medicare Part B.

While those previous bills found bipartisan support in Congress, the National Active and Retired Federal Employees Association (NARFE) has pushed back on those proposals over the Medicare provision.

This time around, however, NARFE has endorsed the legislation. On Tuesday, NARFE National President Ken Thomas wrote a letter to House members on Tuesday urging them to support the bill in this week’s floor vote.

“H.R. 2382 will not solve all of USPS’ financial problems, but it does provide a common-sense first step,” Thomas wrote. “It would rescind an unnecessary and unreasonable mandate and provide breathing room for future reforms.”

Jim Sauber, the chief of staff at the National Association of Letter Carriers, told Federal News Network that the bill would be a good first step to put USPS on firmer financial footing — especially in an election year, when lawmakers are less likely to take big swings on legislation.

“I think that’s our only real vehicle between now and the election. I don’t see a big, comprehensive bill, the kind that we’ve been talking about now for 10 years coming together, particularly in an election year. So in the short-term, we’re going to focus on the repeal bill,” Sauber said in an interview.

While the USPS Fairness Act won’t necessarily solve all of the Postal Service’s financial problems,  including a decline in mail volume, American Postal Workers Union President Mark Dimondstein said it would serve as an  “important step forward.”

“We think that there’s real hope of getting that piece of legislation done. And I think if we can’t get wholesale postal reform, then let’s at least get the positive steps going forward,” Dimondstein said. “Congress created this mess, Congress should fix it. And if they’re not going to fix it the whole way, then we’re asking them to fix big pieces of it. And then we’ll take the next big piece from there.”

Meanwhile, the Postal Service has already made it clear it can’t continue with business as usual. USPS defaulted on $7.3 billion in payments to its retiree health fund in 2019, and the Government Accountability Office found that the agency has missed more than $48 billion in payments to the fund since 2018.

If the Postal Service continues to miss payments to the fund, the Office of Personnel Management projects the fund will run out of money by 2030.

If USPS depletes its retiree health benefits fund, GAO says it would be required by law to make the payments necessary to cover its share of health benefits premiums for postal retirees.

“However,” GAO auditors wrote, “current law does not address what would happen if USPS misses those payments. Depletion of the fund, together with USPS’s potential inability to make remaining contributions, could affect postal retirees as well as USPS, customers, and other stakeholders, including the federal government.”

Monday also marked the deadline for members of the public to submit comments on the Postal Regulatory Commission’s proposed rule that would allow USPS to set postal rates higher than the rate of inflation under certain conditions.

The PRC, under the new proposed rule, would keep a price cap on USPS market-dominant products, but would base that cap on factors like declining mail density, and mandatory payments to fund health benefits for future postal retirees.

Sauber said the final rate-setting rule, expected sometime this spring, combined with the USPS Fairness Act, would “go a long way towards stabilizing the Postal Services finances,” and set up the next Congress to tackle more comprehensive reform in 2021.

Rep. Gerry Connolly (D-Va.), chair of the Government Operations Subcommittee of the House Oversight and Reform Committee, projected a similar timeline on postal reform in an interview last July, but stressed that Congress is “beginning to run out of time” to do something.

“We’ve got to act first, and the Senate’s going to need a lot of time to act. I think we’ve probably got to give them the whole calendar year next year,” Connolly said.

What a change in leadership means for USPS

Amid its push for legislative and regulatory fixes, the Postal Service also seeks a new leader for the organization. Brennan, who was to retire at the end of January, has postponed her departure indefinitely until the Postal Service finds a successor.

At a USPS Board of Governors meeting last November, Governor John McLeod Barger said the board had hired the firm Russell, Reynolds and Associates to lead the search for a new postmaster general.

That move, Dimondstein said, suggests that the board is looking outside the organization for a new postmaster general. If so, that would be a pendulum swing for USPS leadership.

The past four postmasters general, including Brennan, held USPS leadership positions before taking the top job. As for Brennan, she spent her entire 33-year career with the agency and started out as a letter carrier in Lancaster, Pennsylvania.

After that, the previous four postmasters general came from private-sector leadership positions before taking on the job.

Regardless of where the next postmaster general comes from, Dimondstein said a top challenge will be navigating a changing USPS business model.

“Mail habits are changing, volumes are changing, but in some areas, mail volume goes down and in other areas volume goes up. We want a postmaster that will be innovative, that will be creative, that will look at expanding service,” he said. “We’re very keen that the post office can do so much more.”

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