USPS reform bill offering ‘much-needed reset’ on its finances passes Senate

A long-awaited reform bill expected to save the Postal Service a total of $107 billion is headed to President Joe Biden’s desk.

The Senate on Tuesday passed the Postal Service Reform Act, which would, among other things, eliminate a 2006 mandate from Congress to pre-fund retiree health benefits.

Postmaster General Louis DeJoy supports the bill, as do postal unions and associations, who say it will address USPS’s long-term financial challenges.

DeJoy said in a statement...

READ MORE

A long-awaited reform bill expected to save the Postal Service a total of $107 billion is headed to President Joe Biden’s desk.

The Senate on Tuesday passed the Postal Service Reform Act, which would, among other things, eliminate a 2006 mandate from Congress to pre-fund retiree health benefits.

Postmaster General Louis DeJoy supports the bill, as do postal unions and associations, who say it will address USPS’s long-term financial challenges.

DeJoy said in a statement that the bill, combined with operational reforms in the agency’s 10-year reform plan, will allow USPS to continue to self-fund its operations “for many decades to come.”

“I thank the Senate and our committee leadership that broke the 10-year logjam which has long constrained the finances of the Postal Service,” DeJoy said.

Senate Majority Leader Chuck Schumer (D-N.Y.) said the legislation would give USPS a “much-needed reset” and relief from an unsustainable business model.

“Because of today’s bill, the Postal Service will be stronger, more efficient and better able to serve more people, and we did it on a bipartisan basis,” Schumer said.

American Postal Workers Union President Mark Dimondstein said the 2006 pre-funding mandate “strangled the Post Office financially.” The legislation, he said, will allow USPS to reinvest in its workforce and infrastructure.

“When that money comes back into the postal system, it gets turned into better staffing, which gets turned into better service. It gets turned into better equipment, better buildings and better vehicles,” Dimondstein said in an interview Tuesday.

The bill stands out as the first major piece of postal reform legislation to make it through Congress in more than 15 years, and addresses issues that stem from the Postal Accountability and Enhancement Act, the last reform effort lawmakers passed in 2006.

The bill now heads to the White House, and Biden, who supports the legislation, is expected to sign it.

John McHugh, a former secretary of the Army and chairman of the House Oversight Committee’s Postal Service Subcommittee, now chairman of the Package Coalition, said the decision from Congress to eliminate the pre-funding mandate is the “right thing to do.”

McHugh said the 2006 Postal Accountability and Enhancement Act made sense at the time, and helped cement USPS’s role in the emerging e-commerce package business, but didn’t account for the 2008 recession, which led to a significant loss in first-class mail volume that never returned.

“Packages were taking off, but it also came with a great decline in first-class revenue. And remember, just after 2006, the economic bubble burst, the economy went into a significant slump,” McHugh said.

House and Senate lawmakers introduced many similar postal reform bills over the past few years, but few made it far in either chamber, despite broad recognition from both parties that USPS wasn’t on firm financial footing.

Dimondstein said the COVID-19 pandemic created a sense of urgency for Congress to pass this legislation. USPS became an essential service during lockdowns in the early stages of the pandemic and saw a surge in package deliveries.

The pandemic, however, also renewed concerns about the agency’s financial condition.

“It’s been a tragic, challenging time, but I think it did underscore for the people of the country, the politicians on Capitol Hill, just how important the public Postal Service is to the people of the  country, and our general mission of binding the country together really shined through in the last couple of years. I think that is a factor in everybody coming together,” Dimondstein said.

The bill will save USPS $50 billion over the next 10 years by eliminating a provision from the 2006 law that required USPS to pre-fund retiree health benefits well into the future.

USPS, under the legislation, will instead return to an annual pay-as-you-go system to fund retiree health benefits.

“When those benefits need to be paid, the [USPS] simply pays for it, and so that will go a long way in addressing some of the financial squeeze that the 2006 law put on the Postal Service,” Dimondstein said.

The legislation also forgives USPS’s obligation to pay $57 billion in scheduled payments to its retiree health benefits fund.

The agency, citing its long-term financial challenges, has defaulted on payments to the fund since 2012, but still had to count these payments in its financial statements.

The bill also requires all future postal retirees to enroll in Medicare parts B and D.

Dimondstein said about 80% of APWU retirees already enroll in Medicare Part B voluntarily.

“It should save money over the long run for the individual worker, because our premiums will be somewhat less. It’ll save money for the Postal Service, because their part of the premiums will be a little less, because Medicare will become the primary health care provider and [Federal Employees Health Benefits program] will become the secondary,” he said.

Senate Homeland Security and Governmental Affairs Committee Chairman Gary Peters (D-Mich.), who led efforts to pass the bill, said the legislation would not have any effect on Medicare Part B or Part D premiums.

Peters said fewer than 40,000 new USPS workers would need to enroll in Part B under the legislation, compared to the 62 million currently in the program. The bill, he added, wouldn’t have any effect on the Medicare Part A trust fund.

The Senate passed a “clean” version of the bill, without any amendments, to avoid having to send the bill back to the House before heading to the president’s desk.

Sen. Rick Scott (R-Fla.) objected to the Senate passing the bill without any room for amendments, and without scheduling a hearing or markup from the Homeland Security and Governmental Affairs Committee.

“I’ve been disappointed that I’m on the committee that deals with the Postal Service, and we didn’t even have a vote on this. I didn’t have any opportunity in the committee to propose an amendment. It doesn’t look like I’ll have an opportunity here to have my colleagues vote on an amendment, and I don’t think that’s right,” Scott said.

Peters, however, said the final version of the bill reflects compromises from all sides, and only includes USPS reforms that have been “overdue for over a decade.”

“This bill is limited to absolutely essential consensus, bipartisan reforms that are necessary to ensure that the Postal Service can survive and can continue delivering for the American people. Everything in this bill has bipartisan agreement,” Peters said.

The bill would also allow USPS to branch out into offering non-postal services on behalf of state, local or tribal governments.

Dimondstein said that would allow USPS to help issue state hunting or fishing licenses or even offer some services on behalf of state departments of motor vehicles.

“You have some states, where for people to actually get state government services in person, sometimes people have to drive 60, 70 80, 90 miles to get them. And in their own town, there’s a post office right there,” Dimondstein said.

Sen. Tom Carper (D-Del.), the author of several previous postal reform bills, said USPS becoming a storefront for other government services is a crucial part of its future.

“We need people on the [USPS] Board of Governors who are very good at figuring out how do we help the Postal Service monetize the burden of going to every single mailbox in the country six days a week. How do we do that? How do we help the Postal Service turn that into a financial opportunity?” Carper said.

Sen. Jerry Moran (R-Kan.), another long-time supporter of USPS reform,  said the Postal Service’s quality of service has “significantly declined” in rural parts of the country as its financial condition worsened.

“Over the past decade, the Postal Service has slowly — and sometimes quickly — eliminated services. And in the elimination of services, it created what I’d call a death spiral — shorter hours, fewer post offices, mail processing facilities further away and fewer of them,” Moran said.

To mitigate its losses, USPS has closed some of its mail processing facilities. But Moran said he would press USPS to reopen some of the processing facilities that have been closed in Kansas.

“We need the return of those postal processing facilities. Their departure had dramatic and consequential effects upon the Postal Service,” Moran said.

The legislation, however, doesn’t change the Postal Service’s financial condition overnight.

Porter McConnell, the co-founder of the Save the Post Office Coalition, and director of the Take on Wall Street Campaign, said Congress “has laid a foundation” for the Postal Service’s future by passing the bill, but said additional work is needed.

“The post office of the future, just like the post office of the past, must be free to meet new needs and bring in new revenue. If Congress and the President don’t clear a path for this growth and change, we’ll just find ourselves having the same conversation again in ten years,” McConnell said.

McHugh said Congress and watchdogs should allow time for the Postal Service to improve its financial condition.

“You’ve got to give it a little bit of time to work, and this is not a cure-all. I don’t think anybody would come out of the House or Senate chamber and say, ‘This bill is going to fix everything.’ And I don’t think the postmaster general would say that either. So it’ll take a little while, and I think it’d be interesting to give them a fair amount of time to utilize the savings that will come out of this, and they don’t all come on day one either,” McHugh said.

Related Stories

    Sunlight shines on the U.S. Capitol dome on Capitol Hill in Washington, Monday, Feb. 21, 2022. (AP Photo/Patrick Semansky)

    Senate nears final vote on USPS reform bill after running into procedural hurdles

    Read more
    (AP Photo/Gene J. Puskar)A postal worker loads a delivery vehicle at the United States Post Office in Cranberry Township, Pa., Wednesday, Aug. 19, 2020. (AP Photo/Gene J. Puskar)

    USPS opts for mostly gas-powered vehicle fleet over Biden administration’s objections

    Read more