In a whirlwind of political activity, Senator Tom Carper (D-DE) introduced S. 1507, the Postal Service Retiree Health Benefits Funding Reform Act of 2009 on July 23 and yesterday the Senate Committee on Homeland Security and Governmental Affairs approved a modified version of the legislation. In Washington time, that's about as fast as it gets. The reason for the warp speed attention is the rapidly declining financial condition of the Postal Service.

The original S. 1507 as introduced on July 23 was recommended by the Obama Administration's Office of Management and Budget to address the postal financial crisis. The bill would reduce postal contributions for health benefit liability costs by $2.4 billion in FY 2009, $2.5 billion in FY 2010, $1 billion in FY 2011, $300 million in FY 2012, and $100 million in FY 2010. These reductions are achieved by changing the current front-loaded payment requirements with a back-loaded schedule that also extends payments until 2019 instead of the current 2016.

In addition to the health benefit payment relief, the introduced S. 1507 also would have provided temporary increased Postal Service borrowing authority for FY 2009 and FY 2010. Instead of the current $3 billion cap on borrowing each year, the bill would permit the Postal Service to borrow an extra $2 billion each year. And this increased borrowing authority would not have been subject to current law which caps total Postal Service borrowing at $15 billion. Hence, the Postal Service would have been able to borrow $19 billion total through FY 2010. For an organization that has warned it may not be able to repay its current outstanding debt, the increased limit would seem to make matters even worse.

In yesterday's business meeting of the Committee on Homeland Security and Governmental Affairs the bill was "marked-up," or modified by Committee members. Setting the tone, Senator John McCain (R-AZ) stated that the Postal Service financial crisis was "one of the best kept secrets in America." Before departing for another committee obligation Senator McCain said the Postal Service is on "a downward slope and members of Congress have some tough decisions to make." He cited falling mail volumes, revenue declines, and featherbedding as roots of the crisis.

Senator Susan Collins (R-ME) said that much of the problem results from "Postal Service failure to make bold reforms that are necessary." Senator Carper provided an overview of the Postal Service's downward financial spiral and noted that the Postal Service peaked at 213 billion pieces of mail in 2007 and this year will handle only about 175 billion. He said the Postal Service projects total mail volume at 167 billion pieces in 2010.

Senator Coburn (R-OK) stated the Postal Service 2010 volume projection was a rosy scenario, suggesting mail volume may decline even more. He went on to say that the Postal Service has a "failed business model" and it's time for Senators to "take the heat and do what's necessary." Mr. Coburn pointed out that 80% of postal costs are labor related and yet current law does not permit an arbitrator to consider the financial health of the Service when making arbitration decisions. "That's wrong," said Senator Coburn.

Senators then began offering amendments to S. 1507 and, surprisingly, a number of amendments were adopted. The following amendments were accepted by a majority of Committee members:

Coburn: Require the arbitrator to consider the financial condition of the Postal Service.
Coburn: Prohibit the Postal Service from paying bonuses if the Postal Service had year-end net loss in the year for which the bonus is awarded.
Collins: Limit the Postal Service outstanding debt to $15 billion, as required under current law.
Collins: Require GAO to expedite a study of Postal Service options and strategies for long-term structural and operational reforms.
With the Senate expected to adjourn next week for its August recess, the first opportunity for vote by the full Senate is in September. It could be considered as free standing legislation or incorporated into another bill. With postal unions and some management associations expected to strongly oppose the Coburn amendment requiring an arbitrator to consider the financial condition of the Postal Service, passage of the bill as approved in Committee yesterday is anything but certain.