The US Postal Service has welcomed a bill enabling it to restructure services including theelimination of Saturday delivery but criticised plans for regulation, additional money borrowing
and retirement obligations.Introduced yesterday by the Government Reform Committee Chairman Darrell Issa, the “PostalReform Act 2011” would eliminate mail delivery on Saturday and make it easier for USPS to shut downfinancially unsustainable post offices and regional mail processing centres.
In addition, the bill proposes the creation of a Solvency Authority, modelled and named afterthe DC Control Board which was set up in the 1990s to oversee the finances of the US capital,Washington, D.C. “The Postal Service Financial Responsibility and Management Assistance Authority”would have a mandate to cut costs, protect universal service, and return USPS to financialsolvency. To accomplish its mission, the Authority could use a supplemental borrowing authority of$10 billion, backed by USPS property as collateral.
A separate body, the Commission on Postal Reorganization (CPR), would be created to reviewpostal infrastructure and eliminate costly excess capacity and facilities. Over its first year, theCPR will recommend closures worth $1 billion a year for post offices. Over the second, it willrecommend $1 billion a year closures for mail processing and a 30% reduction in managementfacilities. If the Congress does not reject the CPR’s recommendations, they become law.
“The Postal Service lost $8.5 billion last year. It is going to lose, at least, $8.3 billionthis year. And it is projected to lose $8.5 billion the year after that,” Issa said. “Congresscan’t keep kicking the can down the road on out of control labour costs and excess infrastructureof USPS and needs to implement reforms that aren’t a multi-billion dollar taxpayer funded bailout.This legislation encourages USPS to modernise its retail network and enables USPS to act more likea business,” he declared.
The legislation will also eliminate the benefit disparity between the postal workforce and otherfederal employees, which would have saved $700 million in fiscal year 2010, and it will ensure thatpostal wages are comparable to the private sector. The bill will also make several changes to USPSrevenue and contracting policies.
The changes in the Postal Reform Act are expected to save USPS at least $6 billion per year whenfully in effect. The Authority will be required to make additional adjustments to bring costs intoline with expenditures in order to avoid the prospect taxpayer bailouts in the future.
Issa introduced the bill the day after USPS announced its intention to suspend its paymentstowards certain employee pension funds from today as an emergency measure to preserveliquidity.
In response to the Postal Reform Act 2011, the US postal operator claimed that the bill is basedon the assumption that the Postal Service’s challenges result from too little regulation. “Theopposite is true. Our financial instability is the result of dramatic loss in volumes, coupled withrestrictions imposed by Congress that have prevented the Postal Service from adequately respondingto those losses in a business-like fashion.”
“We strongly oppose a provision in the bill that provides for an additional $10 billion inborrowing authority from the U.S. Treasury. The Postal Service does not need to incur additionaldebt, we need the money back that is already owed to us. We also strongly oppose sections of thebill that would create more government bureaucracy and slow our progress on streamlining ouroperations,” the company added.
USPS also stressed that several core issues were not addressed in the legislation includingthe elimination of the current mandates requiring retiree health benefit pre-payments, which coststhe Postal Service $5.5 billion annually. It asked for the permission to access Civil ServiceRetirement System and Federal Employees Retirement System (FERS) overpayments. The FERS overpaymentis estimated to be $6.9 billion.
However, USPS acknowledged the move to a five-day delivery. “We are pleased that the billrecognises the need for a change in delivery frequency. The bill’s provision to move to five-daydelivery would save the Postal Service $3.1 billion annually.”
“The need for legislative change is urgent. Despite significant and ongoing cost cutting actionsand progress on new revenue generation, the Postal Service is in danger of running out of cash asearly as this October,” the company concluded.
