Taxpayers vs. the Post Office Bureaucracy

When it comes down to outdated business model of the Post Office vs. taxpayers and postal workers, Rep. Darrell Issa (R-Calif.) sides with taxpayers and postal workers.

Yesterday, the United States Postal Service (USPS) announced it would stop paying the employer share of its employees’ retirement fund. ABC news reported about “sheer chaos on the work floor,” according to 32-year postal veteran Clarice Torrence. The action is yet another sign that the USPS is in continued financial strain.

Today, Issa, who is chairman of the House Committee on Oversight and Government Reform, introduced the Postal Reform Act (PRA), which seeks to reform the USPS and prevent a potential taxpayer bailout.

In a statement, Issa called the legislation the “most fundamental reform of the postal service that has been proposed since USPS was first created from the old Post Office Department.”

“The Postal Service lost $8.5 billion last year. It is going to lose, at least, $8.3 billion this year. And it is projected to lose $8.5 billion the year after that,” Issa said. “Congress can’t keep kicking the can down the road on out of control labor costs and excess infrastructure of USPS and needs to implement reforms that aren’t a multi-billion dollar taxpayer funded bailout.”

Among other thing the legislation would do is create a temporary agency called the Postal Service Financial Responsibility and Management Assistance Authority. PRA gives the Authority the ability to restructure many parts of the USPS and could recommend cost savings measures to bring it back to solvency.

Unlike many other government agencies that once created last in perpetuity, the PRA puts an explicit sunset provision on the Authority. Once the USPS meets several benchmarks the Authority will be disbanded.

PRA also creates the Commission on Postal Reorganization (CPR) which can to recommend infrastructure changes and closures to Congress — such as closing “unsustainable retail postal facilities.” Ultimately, Congress will have the final say, but Issa estimates that if the CPR’s recommendations are accepted taxpayers could save up to $2 billion a year.

According to his statement, the legislation encourages the post office to modernize and act more like a business. PRA would bring the pay and benefits of the postal workforce to parity with the private sector. In Fiscal Year 2010 alone, this could have saved taxpayers $700 million. Issa estimates that the total savings of the PRA will be over $6 billion per year if all parts of the bill are enacted.

The Competitive Enterprise Institute will feature the PRA on the Pro-Worker section of its website and score it on the website’s Congressional Labor Score Card.

Highlights of the Postal Reform Act include:

  • Postal BRAC: Creates the Commission on Postal Reorganization to eliminate costly excess capacity and facilities. Over its first year, the CPR will recommend closures worth $1 billion/year for post offices. Over the second, it will recommend another $1 billion/year in closures for mail processing and a 30 percent reduction in management facilities.
  • Solvency Authority: Creates an Authority modeled on and named after the D.C. Control Board with a mandate to cut costs, protect universal service, and return USPS to financial solvency. The Authority is triggered into existence when USPS goes into default on any obligation to the federal government for more than 30 days. It has the authority to require renegotiation of existing collective bargaining agreements and the power to unilaterally modify those agreements if renegotiation fails. To accomplish its mission, the Authority may use a supplemental borrowing authority of $10 billion, backed by USPS property as collateral.
  • Five-Day Delivery: Allows USPS to move to five-day delivery of mail.
  • Pay Comparability: Clarifies existing law to include wages and benefits in determining total compensation comparability with the entire private sector.
  • Health and Life Insurance: Requires USPS employees to pay the same health and life insurance premium percentages as other federal workers. This provision is phased-in to apply to union employees after their current bargaining agreements expire.
  • Mediation Arbitration: Modifies the collective bargaining process to the 2003 Presidential Commission recommended mediation-arbitration process. Also requires arbitrators to take into account total compensation comparability and the financial situation of the Postal Service in any decision.
  • Cost Coverage: Requires all market-dominant products to cover costs, while maintaining the CPI price cap.
  • Underwater Products: For classes below 90 percent cost coverage, rates are increased by 5 percent annually above the price cap.
  • Non-Profit Discount: The non-profit advertising discount is reduced by 5 percent a year from 40 percent to 10 percent of the most closely corresponding class.
  • Political Committees: Ends the rate preferences for national and state political committees.
  • Advertising: Authorizes USPS to sell advertising space on USPS facilities and vehicles. All advertising must maintain at least 200 percent cost coverage and be consistent with USPS’s integrity.
  • State Government Services: Authorizes USPS to provide services for state governments that enhances USPS’s value to the public. Such services must not interfere with or detract from the value of postal services.
  • Contracting accountability and transparency: Reaffirms accountability for delegations of contracting authority and requires their disclosure when outside the functional contracting unit. Requires disclosure of most noncompetitive purchase requests above $250,000.
  • Contracting ethics: Requires USPS to establish regulations to prevent conflicts of interest in the contracting area, with ethics officials reviewing any ethics issues that arise.