On Tuesday, April 30th, the House Committee on Oversight and Reform held a hearing on the financial condition of the Postal Service. The Committee’s main goal was to discover a solution to USPS’ continuing financial troubles. Many heavyweights participated in the discussion, with everyone from Postmaster General Megan Brennan to Alexandria Ocasio-Cortez in attendance. Although the discussion covered many topics, everybody recognized one unanimous point. In order for the Postal Service to survive, we must get rid of the misguided pre-funding burden the organization has been dealing with since 2006.
The House Committee on Oversight and Reform Has Had this Conversation Before
For Congressman and Chairman of the Committee Elijah Cummings, the near-three hour long hearing was a bit like the movie Groundhog Day. USPS has long been plagued by financial difficulty, facing an $125 billion deficit. However, the Committee convened three years ago to have this exact same conversation regarding the Postal Service’s financial health. In the Committee’s 2016 hearing, it was proposed that Congress should:
- Alleviate the burdensome requirement for pre-funding retiree healthcare benefits
- Allow the Postal Service to have separate postal-only health plans that integrate fully with Medicare
- Allow the Postal Service to offer limited non-postal financial services such as Post Office money orders and certain types of gift cards
- Require the Postal Service to create a new Chief Innovation Officer charged with developing new innovative products, as any business does
Despite the above points, the Committee’s 2016 proposal never made it past the Senate floor. Congressman Cummings expressed his frustration at the lack of a solution in this recent hearing’s opening statements.
“We were so much there. We had a solution,” he said. “And it was a solution I felt pretty good about. I still think it’s the best solution.”
The Argument Against Privatizing USPS
One of the main suggestions from President Trump’s Postal Task Force is that the government should privatize the Postal Service. The Task Force points to Great Britain’s postal system as an example of successful privatization. However, while privatizing USPS allow the organization to access debt and equity markets for funding, members of the Committee adamantly stood against it.
Congressman Steven Lynch of Massachusetts pointed out the financial holes in the Postal Task Force’s logic.
“Privatization, which I firmly oppose, would require the taxpayer in the US to pick up $38 billion in unfunded liabilities for retirees’ benefit costs,” he said. “These costs don’t go away, they just get shifted. Taxpayers would have to pay this $38 billion, and $62 billion in retiree healthcare unfunded liabilities. Basically, it would shift $100 billion in debt over to the taxpayers based on the privatization model of Great Britain we have here today. There’s much more we can do here to get the Postal Service squared away.”
“We should hold ourselves to a higher standard here in the United States,” Congressman Lynch concluded. “We should treat our postal workers with respect and decency based on the job that they do.”
Representative Cummings also weighed in on the drawbacks of privatizing USPS in a more simple statement.
“I don’t want us to be placed in a situation where people are paying $1.50 for a stamp,” he said. “I love the postal system and I buy my stamps, but that’s kind of high.”
Privatizing USPS Still Won’t Solve the Pre-Funding Problem
Unfortunately, simply privatizing the US Postal Service still wouldn’t close the widening financial gap. As Postmaster General Megan Brennan stated, most of the issue lies within the pre-funding legislation enacted in 2006.
“The onerous burden to pre-fund retiree health benefits is roughly 80% of [our] net losses in the past decade,” she said.
In actuality, USPS hasn’t even been paying out the required pre-funding the past few years. In order to conserve cash and focus on delivering the mail to the American public, the Postal Service has defaulted on $48 billion of pre-funding benefits. Ignoring the pre-funding payments might come across as rebellion, but it’s the only way that USPS has survived. The financial burden of pre-funding is too great to bear, and following the legislation would strike a swift ending blow to USPS.
“If we make our legally mandated payments in 2019, we will be out of cash in 2020,” Brennan remarked.
AOC Weighs In On the Issue
In perhaps the most poignant statement of the day, Representative Osacio-Cortez engaged in a direct dialog with Postmaster General Megan Brennan about the unreasonable burden that pre-funding legislation places on the Postal Service.
Osacio-Cortez posed to Brennan, “Postmaster General, how critical is eliminating the burden of pre-funding retiree health benefits to placing the Postal Service on sound financial footing?”
“It will go a long way, Congresswoman,” Brennan answered candidly. “It will generate roughly 3 billion dollars in savings per annum, and over 33 billion over a ten year period.”
“There is no way we can develop a plan…that is realistic unless we lift this burdensome requirement on you,” Osacio-Cortez said, and received no argument from anyone.
“This is also a question of dignity of work,” she continued. “I want to commend you and your commitment for maintaining that dignity of work for our Postal Service workers and ensuring that we find a business model that works in a way that does not compromise the right to health care. So, that being said, I would like to make the recommendation that we eliminate this burden of the pre-funding retiree health costs so that you can do your job.”
Postmaster General Brennan’s Suggestion
During the hearing, Postmaster General Megan Brennan offered an interesting suggestion to help USPS. She posed the idea of delivering mail only five days a week, but delivering packages all seven days. Brennan argued that even though parcels are a small part of USPS’ pipeline, they generate the most revenue. Logically speaking, it’s hard to disagree. As more eCommerce businesses spring up, it only makes sense for USPS to expand their delivery timeframes. This would undoubtedly result in more revenue for the Postal Service. However, some Committee members didn’t seem too keen on the idea, stating that USPS should continue focusing on delivering mail rather than packages. Therefore, that disagreement makes the issue of pre-funding still the biggest obstacle that the Postal Service needs to surmount.
In conclusion, both the Committee members and USPS officials are on board with pulling USPS out of the financial hole it’s currently in. However, the $125 billion-dollar question of “how” still remains. At this point in its near-250 year history, the Postal Service is at a critical crossroads. There’s no question that America needs USPS, and finding a way to save the organization in the age of eCommerce is make or break.
Mr. Frederic Rolando, the President of the National Association of Letter Carriers, spoke on the importance of finding and implementing the correct solution for the future.
“The cost of misconstruing the future can be high,” he said during the hearing. “Indeed the Internet did not destroy the Postal Service as predicted. Just imagine if we had given into those who were advocating the end of Saturday delivery in 2011 or 2012. We would’ve missed out on the eCommerce boom. Worse, we would have unnecessarily eliminated tens of thousands of good jobs and weakened the Postal Service.”
This time around, the issue is bigger than riding the waves of economic trends. The future of USPS has come down to the wire. As for now, we’ll see if the Committee can move this issue forward past the Senate. Like Postmaster General Brennan said during the hearing, the Postal Service literally can’t afford to wait another three years for Congress to find a solution.