Today (February 5th) is a big day for the United States Postal Service. Why, you might ask? The answer lies in Washington, D.C. There, the House of Representatives is prepared to vote on a postal reform bill called the USPS Fairness Act. The bill, if passed, would repeal the onerous pre-funding legislation Congress enacted in 2006 that has plagued the financial health of USPS ever since. Representative Peter DeFazio of Oregon introduced the USPS Fairness Act back in April of 2018. The bill currently has 301 co-sponsors.
Pre-Funding Legislation is the Biggest Reason Why USPS Keeps Losing So Much Money
Outside of this pre-funding burden, USPS certainly has its fair share of problems. However, the pre-funding legislation is the main reason why USPS loses billions of dollars year over year. Since Congress enacted it in 2006, this legislation requires USPS to set aside massive amounts of money to pre-fund future employees’ health and retirement benefits decades in advance. Needless to say, it has put USPS in a major financial hole for over a decade. In fact, USPS started reporting yearly losses only after Congress enacted the legislation in 2006.
In comparison, other carriers such as UPS (NYSE: UPS) and FedEx (NYSE: FDX) aren’t required to pre-fund future employees’ benefits in the same way. As a result, many shipping insiders have felt that USPS has been operating with an unfair disadvantage…even though USPS still consistently outperforms other carriers. Apparently Representative DeFazio and 301 of his co-representatives feel the same way.
If Postal Reform Bill Repeals Pre-Funding, USPS Will Be On the Path to Financial Stability
It should be noted that the USPS Fairness Act is not the total comprehensive postal reform bill that USPS needs. It is, however, an important first step to place the Postal Service back on the path to financial stability. If the House of Representatives (and then the Senate) passes this postal reform bill and gets rid of the pre-funding legislation, USPS will have much more room to operate. America needs the US Postal Service more than most people realize, and if our government doesn’t repeal this pre-funding legislation, the organization will run out of cash this year, in 2020.
The House will convene at 12 pm EST, and the postal reform bill is currently 14th on the schedule. If you’d like to watch the live proceedings throughout the day, you can follow along here.