Is a Taxpayer Funded Bailout Needed to Reform the Postal Service?

by | Feb 20, 2018

Last Updated June 17, 2024

reformThe President’s 2019 budget proposal addresses the failing finances of the United States Postal Service. The proposal says reforms are needed to allow it to “meet it’s financial and service obligations with business revenue, as intended, rather than a taxpayer-financed bailout”.

Postal Service Financial Problems

The USPS continues to report big losses when the agency announces its financials at the end of each quarter. It reported a $540 million net loss for the 1st fiscal quarter this year and for 2017, it reported a $2.7 billion net loss. This makes 11 straight years of financial loss.

First class mail is declining with more internet use. USPS noted mail volumes declined by approximately 20 billion pieces.

Benefits Costs

One of the biggest contributing factors if the cost of providing health and retirement benefits to employees. The White House’s 2019 budget proposal notes, “Since 2012, USPS has prioritized payments to employees and vendors, while defaulting on required payments of more than $5 billion each year to the Office of Personnel Management for current and former employee benefits costs.”

It goes on to say that the Postal Service must be “given the ability to address their expenses—including the cost of personnel—and take appropriate actions to balance service levels with revenue. USPS must also have the flexibility to raise the revenue necessary to support their operations.”

The budget document is vague on how USPS should address their issues. It does reference a report from the Government Accountability Office, where GAO thinks it would be a good idea to take the Postal Services’ finances into consideration when negotiating employee pay and benefits rather than just giving the union what it wants.

Postal Reforms

GAO and the White House budget proposal both agree that reforms are needed.

In this excerpt, the budget proposal states:

“The Budget proposes a combination of operational reforms and retiree health and pension changes to restore solvency to USPS and ensure that it funds existing commitments to current and former employees form business revenues rather than taxpayer funds. Operational reforms include changes to how rates are set, modification of USPS’s delivery schedule, and the use of more efficient delivery methods. In addition to government-wide changes to health and pension programs that will reduce USPS operating costs, postal reforms to modify USPS’s contributions for life and health insurance for employees to be more consistent with government-wide standards.”

The “government-wide changes” referenced aren’t new. They include proposed cuts to retirement benefits such as the elimination of the COLA for FERS employees and of the FERS Special Retirement Supplement and changing annuity calculations to use a high-5.

What Reforms May Happen?

Many changes are proposed under the Postal Service Reform Act of 2017. The bill would have Medicare eligible Postal Service retirees and family members automatically enrolled in Medicare Parts A and B, and the Postal Service would cover a decreasing portion of Medicare Part B premiums for current retirees transitioned into Medicare.

USPS has been stating it needs action from Congress to help its situation.

 

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