Government affairs

Today, the House Committee on Oversight and Reform held a hearing titled “The Financial Condition of the Postal Service” to review the current state of the agency’s finances and the need to address them through reform legislation. On invitation from Chairman Elijah Cummings (D-MD), President of the National Association of Letter Carriers (NALC), Fredric Rolando, provided testimony and answered the questions of the committee members along with other witnesses.

Those witnesses included the Honorable Megan J. Brennan, Postmaster General of the United States Postal Service (USPS); Margaret M. Cigno, Director of the Office of Accountability and Compliance at the Postal Regulatory Commission (PRC); Joel Quadracci, the Chairman, President, and CEO of Quad/Graphics; and Chris Edwards, the Director of Tax Policy Studies at the Cato Institute.

President Rolando’s testimony (viewable here) centered around the urgent need to pass postal reform legislation and to highlight a path to address pre-funding, the primary source of USPS financial losses over the last twelve years. Rolando noted that this began with the Postal Accountability and Enhancement Act of 2006, which accounts for 92 percent of reported financial losses since 2007 and without it, USPS would have recorded profits in each of the past six years. He made clear that the Recession hit the Postal Service especially hard, but what compounded the already existing problem of the pre-funding mandate was the decision of the PRC to make the 2013 exigent rate increase temporary – even though the recession-related volume loss was permanent. This continues to cost USPS $2.1 billion annually.

“A simple repeal of the prefunding mandate remains the most obvious solution to the postal financial crisis,” said President Rolando. “A repeal, in combination with a more sensible rate-setting system from the PRC’s 10-year review, would go a long way toward stabilizing the Service’s finances. In fact, Representatives Peter DeFazio and Tom Reed on Monday introduced a prefunding repeal bill (the USPS Fairness Act - H.R. 2382) yesterday. If enacted, we would still have 12-13 years of funds set aside for retiree health premiums – a total of $47.5 billion.”

In his opening statement, Chairman Cummings made it clear that the postal reform legislation introduced in the 115th Congress was an agreement made between all interested parties that made not have made everyone perfectly satisfied but was a necessary bipartisan plan forward.

“We must not place the burden of reforming the Postal Service on the backs of the postal workers,” said Cummings. “Their wages and benefits are modest. Our nation can and must honor the commitments we have made to the men and women who have dedicate their lives to delivering our mail day-in and day-out in every conceivable condition.”

Ranking Member Jim Jordan’s (R-OH) opening statement centered around the need to address the poor state of postal finances and suggested that “the situation is especially sad as we are lagging behind the rest of the world in reforming our postal system” before taking the time to highlight the varying states of privatization of postal systems of Sweden, Germany, Britain, and New Zealand. He ended by praising the work of the Trump Administration and the White House Postal Task Force report, which calls for an end to collective bargaining rights of postal employees, massive service cuts, and package price gouging, among others.

Committee Vice-Chair Katie Hill (D-CA) cited three points for the poor state of postal finances: decline of first-class mail, increase of expenses, and the pre-funding requirement. In questioning to President Rolando, Postmaster General Brennan, and Ms. Cigno, she noted that all three hold the position that repealing the pre-funding mandate would be the best route forward to improving postal finances but was also curious how they would address the other two points. Rolando noted that this is a three-part process, with repealing pre-funding being one part, on revenue it would be to fill the remaining seven vacancies on the Postal Board of Governors (BOG), and on expenses it would be to implement the ten-year review by the PRC.

In a separate line of questioning to the Cato witness whose testimony chose to address the state of postal finances by privatizing the Postal Service, closing post offices, cutting employee wages, ending collective bargaining, narrowing the Universal Service Obligation (USO), and more – Vice Chair Hill sought to sum up his prescriptions as, “to put it simply, your proposal is to cut jobs, pay people less, and serve fewer people?”

Mr. Edwards response to that line of questioning was, “uhh, yes. Looking down the road, that is going to happen one way or another.” Hill continued by noting the Cato Institute receives significant funding from the FedEx Corporation, which heavily praises the nonprofit for its research and policy proposals.

During questioning, Ranking Member of the Subcommittee on Government Operations Mark Meadows (R-NC) called on Postmaster General Brennan to provide the committee with a 10-year business plan they believe would help fix the Postal Service, to which she committed to providing one within 60 days. Meadows also criticized plans forward by the CATO Institute witness to close post offices stating, “we’re not going to close post offices. There’s not the political will on Capitol Hill to do it, and candidly, when we did it before, it did not save money… As much as this sounds like a good idea, it doesn’t save money. It disproportionately impacts rural communities.”

Additionally, in reference to the Postmaster General’s outline of potential savings in the upcoming 10-year plan by eliminating 6-day delivery, Rep. Meadows stated, “that dog won’t hunt… don’t waste our time… the Chairman is not with you on 5-day delivery and neither am I.”

Also discussed in the hearing were options to address in postal reform legislation such as full or partial postal employee health plan integration into Medicare, utilizing the existing postal infrastructure for additional services and products, addressing the issue of postal rates and pricing, potential prefunding based on the Postal Service’s vested liability for retiree health benefits, and moving the investment of the Retiree Health Fund out of low-yielding Treasury bonds and into a well-diversified portfolio of stocks and bonds that would provide greater returns.

More information from the hearing may be found here.