Postal Reform Bill Not Ready to Deliver

Brian McNicoll
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Posted: Feb 19, 2017 12:01 AM
Postal Reform Bill Not Ready to Deliver

Congress seems serious about postal reform this time around.

After watching legislation die in the election-shortened Congress last year, a bipartisan group of members have introduced the Postal Service Reform Act of 2017 in the first month of the new Congress.

Rep. Jason Chaffetz (R-UT), chairman of the House Committee on Oversight and Government Reform, introduced the legislation along with Rep. Elijah Cummings (D-MD), ranking member of the committee, and Reps. Mark Meadows (R-N.C.), Gerry Connolly (D-VA), and Stephen Lynch (D-MA). Lynch is the son of a postman.

“Postal reform in a bipartisan way that gets to the president’s desk is something that is certainly a goal for this committee,” Chaffetz said

Sen. Tom Carper (D-DE), who shepherded postal legislation in the Senate during the last Congress, said he was “encouraged” by reports the House “intended to move postal reform … rapidly.”

It’s probably better for taxpayers and mail customers if the legislation does not move too rapidly because the early iteration would not address the problems that have caused the Postal Service to lose $5.6 billion in the last year and $60 billion in the last 10.

The Postal Service’s financial problems stem in part from bad business decisions and in part on requirements imposed by Congress in the last round of postal reform that USPS prefund pensions and benefits for its 600,000 employees.

The Postal Service failed to make the $5.8 billion prefunding payment, leaving it nearly $40 billion behind in contributions to the fund – on top of a $15 billion line of credit from the federal government it already had used to prefund benefits.

Instead of forcing the Postal Service to rethink a business model that has it deeply invested in a number of unprofitable lines, Congress wants to make the benefits problem go away. The legislation proposed by Chaffetz would establish separate plans for postal employees within the Federal Employees Health Benefits Program, the same program Congress itself uses.

Similarly, eligible postal retirees, employees and their families would be re-enrolled automatically in Medicare Part A and Part B. This means the Postal Service, which purports to operate as an independent federal entity, will have its benefits paid for by the federal government.

This wipes out a quarter of the Postal Service’s costs, which gives it a huge leg up on private-sector competitors.

The legislation also calls for a one-cent rate hike on first-class mail, which is already its most profitable service, and a full review of costs for its market-dominant products by Jan. 1, 2018.

It would shrink the Postal Board of Governors from nine members to seven – five appointed by the president and confirmed by the Senate and the Postmaster General and Deputy Postmaster General. This would reduce the influence of electorally accountable presidential appointees to the board in favor of unelected bureaucrats.

The legislation would push the country toward centralized or cluster box delivery. It would require conversion if 40 percent of residents agree and would mandate incremental change to centralized delivery for all business addresses. The legislation would do so without mandating any meaningful changes to USPS operations to improve upon its continuously deteriorating service performance for its core letter mail products.

Additionally, the legislation calls for an annual report to the Postal Rate Commission on the costs, revenues, rates and quality of service for each non-postal service agreement. The Postal Rate Commission then would have to determine whether prices charged for non-postal products truly reflected the Postal Service’s costs, and contracts that don’t pay for themselves could be reduced, redirected or eliminated altogether.

The highly controversial move of closing local post offices also will be addressed in the legislation. Postal Service would consider factors such as distance to the next post office, characteristics of that other location, including weather and terrain, and how much broadband is available in the area.  Further, the time for the Postal Rate Commission to review the Postal Service’s decision to close a post office would be reduced from 120 days to 60.

The proposal also calls for creation of a Chief Innovation Officer position to manage development and implementation of innovative postal products and services, but it does not clarify the level of scrutiny and cost analysis practices needed to understand how new ventures affect the bottom line.  This role also consolidates various inspectors general with oversight on the Postal Service into a new Inspector General for the Postal Community.

The new law would provide some employees with access to the Merit Systems Protection Board, which is supposed to protect whistleblowers.

There are things to like in the legislation, but the positives are far outweighed by concerns and remaining unknowns. The Postal Service needs to stop delivering groceries in San Francisco and fish in New York. It needs to stop losing money on poorly thought out Negotiated Service Agreements with Amazon and others. And it needs to address its very real pension obligations in a way that doesn’t threaten to put American taxpayers on the hook.

It’s doable, but Congress definitely should take time to get this right. It is not there yet.