White House, House Republicans push plans to rescue USPS

Efforts at bringing about postal reform to help the cash-starved US Postal Service have stepped up, with the Obama Administration and House Republicans coming forward with separate plans today. President Obama sent his national deficit reduction plan to be considered by Congress today, including within it measures to help alleviate some of the problems at USPS.

The plan recognised the “enormous value” the Postal Service had in the economy, and the “urgent need” to ensure its long-term sustainability.

“Absent legislative intervention, USPS will be insolvent by the end of September 2011 when it will be unable to make the statutory $5.5 billion Retiree Health Benefit prefunding payment to the Office of Personnel Management, will have exhausted its cash reserves, and will have hit its cumulative statutory Treasury borrowing ceiling of $15 billion,” said the Administration.

The President’s reform package offers to restructure the health benefit prefunding, hand USPS back its $6.9bn overpayment into the federal retirement system over two years,  allow the elimination of Saturday deliveries to cut operating costs and allow USPS to move into non-postal products to expand revenues.

The White House would also allow the USPS a “modest one-time increase in postage rates”, as proposed last year and rejected by the Postal Regulatory Commission, “to better align the costs of postage with the costs of mail delivery”.

The deficit reduction plan said the President’s proposals would provide USPS with more than $20bn in cash relief over the next several years, reducing the Federal deficit by $19bn over a decade.

Commenting on the plan, Postmaster General Patrick Donahoe said the President had offered “helpful recommendations” to stabilise the Postal Service’s financial crisis.

“We are looking forward to reviewing the plan in more detail and we are continuing to work with the White House and the Joint Select Committee on Deficit Reduction on specific proposals that involve the Postal Service,” added Donahoe.

House Republicans

Meanwhile, House Republicans are pushing forward with their proposals to tackle the financial problems at the US Postal Service this week.

Through the postal subcommittee of the House Oversight Committee, the Congressmen Darrell Issa and Dennis Ross will hold a meeting on Wednesday (September 21) to “mark up” Issa’s own bill on postal reform.

The bill, in which Oversight Committee chairman Issa set out the terms for USPS effectively going into receivership if it cannot pay its government healthcare obligations, will be prepared to be heard by the full House of Representatives.

USPS is facing the exhaustion of its $15bn government line of credit over the next few weeks, as its annual losses continue above the $8bn mark.

Issa’s proposals had proposed extending the USPS line of government credit, rather than reforming its massive pension overpayments or healthcare pre-funding requirements.

The two Republicans, who said today they believe USPS will make a $10bn loss this year, are now promising extra measures for the marked up bill to force additional savings from the USPS network, cutting operating costs by $10.7bn.

The Issa-Ross Postal Reform Act, as amended, would allow the Postal Service to eliminate Saturday deliveries, require more use of curbside and cluster-box delivery instead of doorstep delivery, and eliminate “special deals” on postal rates, for example for non-profit organisations.

The Issa-Ross legislation would also force $1bn in savings from the closing of post offices and $2bn a year from consolidation of processing plants – compared to the current USPS plan, which would save $200m from closing 3,600 post offices and $3bn from reducing the number of USPS mail processing plants from 487 to less than 200.

“Bailout”

Issa said today that other proposals currently floating around Congress “put taxpayers on the hook for a multi-billion dollar bailout”.

The Congressman from California said of his alternative: “Passing this legislation will move the Postal Service’s costs in line with its declining revenues to create a financially viable and self-sustaining Postal Service.”

Ross, the Congressman from Florida who chairs the House postal subcommittee, added that the US could not afford to “waste time” with proposals seeking such a “bailout”.

He said: “The Postal Service’s financial situation is rapidly deteriorating, with its projected loss now at $10 billion for this year. We need to act on comprehensive reform, like the Issa-Ross Postal Reform Act, now.”

The firm stance by the House Republicans, in describing pension and healthcare restructuring as a “bailout” to be avoided, comes in stark contrast to the consensus that has been building over in the US Senate – and in the White House – that USPS should have access to its multi-billion dollar pension overpayments to tackle its Congressionally mandated requirement to fund future retiree healthcare costs.

While the Republicans push for USPS to continue paying its dues to the federal government, Congressional Democrats are maintaining opposition to postal facility closures – particularly high-profile post office closures, and particularly in rural areas.