The need to fix the U.S. Postal Service is no longer in dispute, a sentiment repeatedly expressed at a Jan. 21 Senate hearing on how exactly to reform the ailing service.
The question now is how to get stakeholders to come together to address problems that everyone knows about.
The Senate Committee on Homeland Security and Government Affairs hearing examined what measures would help the USPS, with a tenor of urgency prevailing as Postmaster General Megan Brennan and others identified the challenges facing the agency and the need to tackle them quickly.
“In my business, the financially restructuring business, the first job is to keep the patient alive,” said James Millstein, a former restructuring officer at Department of the Treasury and CEO of Millstein & Co.“In this instance making sure that it has sufficient cash revenue to service its operating expenses. In the long term, it is what do we want this postal service to be?”
Panelists cited declines in First Class mail volumes combined with product regulations and price controls among the major hurdles facing the USPS—who, despite producing $68.9 billion in revenue, posted a $5.1 billion loss in 2015.
But the panel said the most significant issue fueling the service’s losses is a 2006 law that requires it to pre-fund retiree health benefits, a condition that applies to no other federal agency.
“Since 2012, the Postal Service has been forced to default on more than $28 billion in mandated payments to the Treasury for retiree health benefits,” Brennan said. “Without these defaults and the deferral of capital investments and aggressive management action, we wouldn’t have been able to pay our employees, our suppliers or deliver the mail." Brennan concluded with a call for legislation to change the situation.
Ranking member Sen. Tom Carper, D-Del., introduced a bill to reform the USPS in September, called iPOST, which would end the statutory requirement and institute other benefits reform, including requiring postal workers and annuitants to enroll in Medicare. The bill has yet to be reported out of committee.
Panelists expressed support for some of the reform bill's goals at the hearing, if for no other reason than making the USPS’s financial books easier to understand.
“Most stakeholders are simply lost in attempting to understand postal financial reports,” said inspector general David Williams. “Since 2007, did the Postal Service make $1 billion or did they lose $57 billion? Decisions are extremely difficult with this kind of seemingly conflicting data.”
The confusion was not lost on committee chairman Sen. Ron Johnson, R-Wisc., who expressed frustration at the labyrinthine nature of the USPS balance sheets when it came to determining its benefits liability.
“Let me just say, this is the problem that I have been having for a number of years,” he said. “As an accountant, I understand numbers and I can’t get them.”
But some federal employee associations, while acknowledging the need for reform, balked at the iPOST bill.
Richard Thissen, president of the National Active and Retired Federal Employees Association, said in a statement that the bill's forced Medicare enrollment and compensation provisions for injured workers were unacceptable, but he supported removing the pre-funding mandate.
“Postal retirees earned their health benefits throughout long careers of service. They should not be required to pay for additional health insurance coverage as a condition of continuing to receive those benefits,” Thissen said.
But the issues didn’t stop with benefits. A spirited exchange developed between Millstein and Williams about what other countries have done to preserve their postal systems and the mandate of universal service.
Millstein mentioned that some countries, including the United Kingdom and Japan, had experimented with privatization with success. But Williams shot back that only “tiny countries” had opted to go that route successfully and that larger countries had abandoned those efforts.
“You don’t have to go down the full road of privatization, but what you do have to do is what privatization permitted in these countries, which is to allow those postal services to engage in other lines of business and to use the profits made to subsidize universal service obligation," Millstein said.
Millstein said that Congress could either subsidize universal service or it could allow the USPS to broaden its products to earn more revenue.
“Either way, it costs something to maintain this network, and clearly the price constraints under which the service is currently operating do not permit it to do this very well for very much longer without incremental price increases or incremental revenues.”
Panelists said reform was not simply needed now, but more accurately, was needed yesterday.
“Frankly, the time to pass [reform], as the inspector general indicated, has passed,” said Postal Regulatory Commission acting chairman Robert Taub. “We’re late on this and the Postal Service needs that financial breathing room.”