With the entire postal community unified in its support of H.R. 22, which now has 195 cosponsors in the House of Representatives, one would think the bill has a pretty good shot to be passed. Before that happens, however, a pesky "scoring" problem has to be addressed. Since the tentative scoring of this legislative proposal reflects the creativity of the Congressional Budget Office, a creative solution probably is in order.
H.R. 22 was introduced on January 6 by Congressmen John McHugh (R-NY) and Danny Davis (D-IL) to revise the required Postal Service retiree health benefit obligation payments. It would not affect the total obligation, but it would provide some relief to the massive payment stream required annually by law.
The Postal Service is obligated to pay $7.4 billion in FY 2009 to cover current retiree health benefit costs, as well as to prefund its retiree health benefit liability. The total payment represents about one tenth of the Postal Service's annual revenue, a percentage far greater than that paid by American businesses or government agencies.
H.R. 22 would allow the Postal Service to pay its share of contributions for annuitants' health benefits, roughly $2 billion, out of the Postal Service health benefits trust fund. But the Postal Service still would be obligated to make a $5.4 billion payment into the trust fund to pre-fund the future health benefit liability. The health benefits trust fund had a balance of over $32 billion at the end of 2008.
It sounds like a reasonable fix to a payment requirement that is unreasonable in these difficult economic times. The Postal Service would still be light-years ahead of other federal agencies and businesses in pre-funding health benefit liabilities. But despite the rational approach of H.R. 22 and strong support of the postal community, the bill must overcome an argument that it would add to the federal budget deficit. Yes, budget deficit concerns apparently still exist in Washington.
The Congressional Budget Office was created in 1974 as a federal agency in the legislative branch of government. It supplies economic data to Congress and provides projections on the national debt. One of its functions is to provide a "score" or cost of legislative proposals. The score obtained from CBO is critically important and greatly affects a bill's prospects for passage. High scores are problematic and low or no scores make the road to passage much smoother.
Since H.R. 22 maintains the requirement to prefund the Postal Service's retiree health benefit liability and continues to pay the health benefit cost of current retirees, one might think it would have no score. But that is not what the CBO has determined.
The CBO has applied "dynamic scoring" for the proposed postal legislative relief, resulting in a preliminary score of $1.6 billion for fiscal years 2009 and 2010. Before we get into the alleged $1.6 billion cost, let's note that dynamic scoring is a controversial CBO approach. It is meant to provide a more complete picture of the budget effects of tax and spending proposals by incorporating the macroeconomic effects of legislation. Critics of this approach argue that it necessarily requires many subjective decisions and leaves CBO open to criticism of bias. That is certainly the case with the CBO preliminary score for this postal legislative proposal.
CBO explains that were the Postal Service to receive the $2 billion annual relief provided by H.R. 22, there would be less incentive for the Postal Service to cut costs. They estimate a $1.6 billion disincentive cost over two years if the requested relief were provided the Postal Service. Why $1.6 billion of less incentive? It's a subjective decision.
If the CBO's disincentive argument holds up under the criticism coming from many, there should be a way to protect against the supposed Postal Service let-down that would occur if the bill becomes law. The Postal Service has an aggressive cost-cutting agenda and an impressive cost-cutting track record in recent years. If there is doubt that such cost-cutting would continue with the relief provided by H.R. 22, then include a mechanism that holds the Service to their goals.
The CBO preliminary score of this legislative proposal is indeed subjective. It may be partly due to CBO's unfamiliarity with the Postal Service, an independent establishment of the executive branch. But subjective or not, a solution to the scoring impediment must be found.
Contact Alliance of Nonprofit Mailers at 1211 Connecticut Ave NW, Ste 610, Washington, DC 20036-2705, 202-462-5132 or www.nonprofitmailers.org
H.R. 22 was introduced on January 6 by Congressmen John McHugh (R-NY) and Danny Davis (D-IL) to revise the required Postal Service retiree health benefit obligation payments. It would not affect the total obligation, but it would provide some relief to the massive payment stream required annually by law.
The Postal Service is obligated to pay $7.4 billion in FY 2009 to cover current retiree health benefit costs, as well as to prefund its retiree health benefit liability. The total payment represents about one tenth of the Postal Service's annual revenue, a percentage far greater than that paid by American businesses or government agencies.
H.R. 22 would allow the Postal Service to pay its share of contributions for annuitants' health benefits, roughly $2 billion, out of the Postal Service health benefits trust fund. But the Postal Service still would be obligated to make a $5.4 billion payment into the trust fund to pre-fund the future health benefit liability. The health benefits trust fund had a balance of over $32 billion at the end of 2008.
It sounds like a reasonable fix to a payment requirement that is unreasonable in these difficult economic times. The Postal Service would still be light-years ahead of other federal agencies and businesses in pre-funding health benefit liabilities. But despite the rational approach of H.R. 22 and strong support of the postal community, the bill must overcome an argument that it would add to the federal budget deficit. Yes, budget deficit concerns apparently still exist in Washington.
The Congressional Budget Office was created in 1974 as a federal agency in the legislative branch of government. It supplies economic data to Congress and provides projections on the national debt. One of its functions is to provide a "score" or cost of legislative proposals. The score obtained from CBO is critically important and greatly affects a bill's prospects for passage. High scores are problematic and low or no scores make the road to passage much smoother.
Since H.R. 22 maintains the requirement to prefund the Postal Service's retiree health benefit liability and continues to pay the health benefit cost of current retirees, one might think it would have no score. But that is not what the CBO has determined.
The CBO has applied "dynamic scoring" for the proposed postal legislative relief, resulting in a preliminary score of $1.6 billion for fiscal years 2009 and 2010. Before we get into the alleged $1.6 billion cost, let's note that dynamic scoring is a controversial CBO approach. It is meant to provide a more complete picture of the budget effects of tax and spending proposals by incorporating the macroeconomic effects of legislation. Critics of this approach argue that it necessarily requires many subjective decisions and leaves CBO open to criticism of bias. That is certainly the case with the CBO preliminary score for this postal legislative proposal.
CBO explains that were the Postal Service to receive the $2 billion annual relief provided by H.R. 22, there would be less incentive for the Postal Service to cut costs. They estimate a $1.6 billion disincentive cost over two years if the requested relief were provided the Postal Service. Why $1.6 billion of less incentive? It's a subjective decision.
If the CBO's disincentive argument holds up under the criticism coming from many, there should be a way to protect against the supposed Postal Service let-down that would occur if the bill becomes law. The Postal Service has an aggressive cost-cutting agenda and an impressive cost-cutting track record in recent years. If there is doubt that such cost-cutting would continue with the relief provided by H.R. 22, then include a mechanism that holds the Service to their goals.
The CBO preliminary score of this legislative proposal is indeed subjective. It may be partly due to CBO's unfamiliarity with the Postal Service, an independent establishment of the executive branch. But subjective or not, a solution to the scoring impediment must be found.
Contact Alliance of Nonprofit Mailers at 1211 Connecticut Ave NW, Ste 610, Washington, DC 20036-2705, 202-462-5132 or www.nonprofitmailers.org
