Will USPS be included in a debt reduction deal?

NAPS Leg/Reg Update – July 25, 2011

Will USPS be included in a debt reduction deal? Financial reforms for the Postal Service, according to a Congressional source, were included in the “grand bargain” that was emerging from debt ceiling talks between President Obama and House Speaker Boehner a week ago. But those White House negotiations stalled last Friday, and House and Senate leaders are now headed toward separate backup plans to raise the debt ceiling. Postal Service reform provisions were aimed at a postage rate increase, greater commercial flexibility, a change in delivery frequency, and some adjustment in USPS pension payments and obligations. The foremost question now is whether USPS reforms will remain in any debt reduction plan that commands enough bipartisan appeal to pass Congress by August 2. If so, those reforms could provide a way for the Postal Service to avoid defaulting on its $5.5 B retiree health benefit payment due September 30 or its $1.2B workers comp payment in early October. (Background: http://scr.bi/nv6bau and http://scr.bi/ot2dHZ)

Benefit hits likely, no matter whose debt deal survives. What is more certain is that benefit cuts for civil servants and postal employees will be included in any budget deal that rises to the top. The likely hits will include increased employee contributions to pension programs, both by new employees and current employees, though new employees could be hit far more. The increases are likely to be phased in over time. The hits could also include another year of freezes on federal pay, as well as greater employee contributions for health insurance. A change in the measure to calculate cost-of-living adjustments to federal and military pensions and Social Security could cause COLAs to be about 0.25 of a percentage point lower than those calculated by the price index now used. http://bit.ly/rbRcN7

Progress on postal legislation wilts. Like the heat wave that has blistered Washington, the pace of postal relief legislation has slowed to a crawl. There are no signs of USPS relief legislation moving in the Senate or the House of Representatives. In the Senate, Sen. Tom Carper (D-DE) and Sen. Susan Collins (R-ME), each of whom have introduced dueling postal bills, are at an impasse over the future of six-day delivery. Carper wants to give the Postal Service flexibility to reduce delivery days, while Collins maintains that delivery day reduction will accelerate a downward cycle. http://nyti.ms/oMMDNn

In the House, House Oversight Committee chairman Darryll Issa (R-CA) has refrained from moving legislation (HR 1351) by Rep. Stephen Lynch (D-MA), supported universally by the postal community, to address USPS pension overpayments and retiree health prefunding obligations. On another front, a procedural attack by Issa on the inclusion of the 6-day delivery mandate in the House Financial Services-General Government appropriation bill appears to have been sidelined. A veto threat against the entire funding bill by President Obama because of severe cuts in IRS funding has postponed House floor action on the bill.

Correcting USPS pension overpayments and transferring any surplus to the retiree health fund remains the optimum solution for solving the Postal Service’s immediate financial problems and avoiding insolvency.

The Postal Service Inspector General in a recent report stands by its findings that the Postal Service has been unfairly overcharged $75 billion for its contributions to the Civil Service Retirement System and has overfunded the Federal Employees’ Retirement System by an additional $7 billion.

Legislation is needed to fully fund the Postal Service’s retiree obligations and eliminate the need for further prefunding. This is why legislation introduced by Rep. Stephen Lynch (HR 1351) is the best immediate solution. Click here to send a message to your House lawmaker to urge cosponsorship of HR 1351.

Post office closures on the way. The US Postal Service is expected this week to announce the planned closure of at least 3,000 post offices, and to ask the Postal Regulatory Commission for an advisory opinion validating its closure plan. The PRC has committed to providing the review within 90 days. The Postal Service has already briefed staff in both the Senate and the House on the retail network review, which forms part of a major effort to “right size” the retail network.

IG reports detail savings in mail processing, transpo networks. The Postal Service Inspector General has issued a series of reports (http://bit.ly/qAa8dX and http://bit.ly/rkz4vW) in recent weeks suggesting ways the agency could find savings by closing processing plants (down to 135) and cutting back on door-to-door delivery of mail.

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  • Liam Skye

    Increased employee contributions to the FEHBP will almost certainly be included in the debt reduction plan – even though USPS employee health benefits are not at all related to the debt.

  • Graywolf

    Well, our union already settled for scheduled increases in our premiums for health care plans…except for those in the APWU plan. This is in addition to the increases that the industry as a whole is predicting will happen next year, 8 to 15 percent by some estimates.

  • Bob

    Why are they talking about the USPS to be included in the debt reduction when no tax money goes to the USPS all the monies used by the USPS is created by postage. and also the goverment owes the USPS $75 billion for over payment to the retiriees health care benifits