In a surprise move this July, the USPS House Committee on Oversight and Government Reform advanced its “Postal Service Reform Act of 2016” out of committee. Attempts in the Senate to get similar legislation out of committee have failed, but this bi-partisan effort in the House is an important step to getting this proposed bill passed.
What’s in the Bill
Healthcare and benefits
House Resolution 5714 concentrates quite a bit on the cost of healthcare for postal employees and retirees. Labor costs for USPS account for around 80% of their expenses, so maximizing the benefits associated with those costs is key to a solvent Postal Service. Currently, USPS employees share in the Federal Employees Health Benefits Program (FEHBP) with most other federal employees. However, due to the physical nature of their jobs, most postal employees are in better shape than their federal counterparts. H.R. 5714 establishes a separately rated postal plan within FEHBP, which is likely to reduce insurance rates for those who enroll.
Additionally, this bill will enroll all Medicare eligible retirees and family into Medicare Part A and B. USPS has paid into Medicare for years, however employees were not enrolled in this program. By allowing postal retirees to use Medicare for their insurance needs first, the postal service will cut the cost of supporting its aging retiree contingent. This will also allow USPS to slowly decrease the premium USPS pays for Medicare Part B, down to zero percent in the fourth year. Union members are not a fan of this part of the bill, as retirees will have to pay the difference to keep their current level of insurance.
Also for retirees, this bill would allow USPS to spread their prefunding of Retiree Health Benefit program over 40 years, and if any surplus exists, it would be returned to the Postal Service.
Operations and personnel
Interestingly, this bill proposes that the current nine member Board of Governors would be reduced to five. This is mainly interesting because the Board has been functioning with only one member this year. Current nominees have been stuck in the Senate, so even with the reduced complement, the current Board would not fill those requirements. The board would also set the compensation for the Postmaster General and Deputy Postmaster General, who would continue to be appointed by the board. The bill also requires that the Postal Service appoint a Chief Innovation Officers and combines the Postal Service and PRC Offices of Inspector General.
The bill would require the incremental conversion of mail delivery to centralized delivery. Business deliveries would be required to migrate, and residential areas would convert when 40% of the residents consent to the new “cluster box” deliveries. Canada Post started an aggressive conversion to centralized delivery in 2014, which was not well liked and finally suspended when their liberal party took control of the government. The US bill seems more manageable, requiring resident approval and allowing for exceptions.
Under the bill, USPS could increase postal rates for market-dominant products by 2.15%. Interestingly, this number is half the amount that was used during the exigency increase. With the Consumer Price Index hovering under one percent this year, this would be the only way for USPS to raise their rates considerably. The Postal Regulatory Commission (PRC) would also need to review the market-dominant rate system by 2018. Interestingly, the bill would remove political committees from those eligible for non-profit rates. The PRC would also conduct a one-time review of the USPS cost allocation methodologies, something mailers have been asking for many years.
H.R. 5714 also authorizes USPS to offer non-postal services, as long as there is a public notice and approval by the Board of Governors. Any of these agreements would need to be reported on and considered by the PRC to ensure that they cover their costs.
Lastly, the bill outlines additional guidelines for the postal service to consider when closing post offices. USPS would need to consider distance, terrain, and broadband availability when evaluating a potential closure, along with allowing the community to comment and appeal any closures.
There were a few notable proposals that were absent from the bill. The most striking was the absence of reforming the prefunding requirements for healthcare for current employees. The prefunding mandate established in the Postal Accountability and Enhancement Act of 2006 (PAEA) has had a major negative impact on postal finances, and many of the pre-payments have been missed. However, Congress uses these accounts to help balance the overall budget, so this reform was not included.
Several years ago, USPS was pushing hard to get approval for five-day delivery of letter and flat mail. But after legislative non-action and the surge of parcel shipments, five-day delivery is no longer considered by the postal service to be a cost savings measure.
From discussion draft to law
If you remember the process from Schoolhouse Rock, after a bill is passed out of committee, the next step is for the entire House to vote on it. But before then, the Congressional Budget Office (CBO) will need to rate it to ensure the fiscal soundness of the bill. The Ways and Means Committee would also need to review the bill as they oversee the Medicare system. If approved by the CBO and the House, it would be sent over to the Senate, whose committee will review and revise it, before bringing it to a larger vote. If both Senate and House can agree to the terms, then it will be up to the president to approve or veto it.
Chances for success
H.R. 5714 still has a long way to go before it lands on the President’s desk. Even with its bi-partisan roots, it’s unlikely to emerge from the Senate in its current form. With a contentious election season gearing up, the next step of progress isn’t likely to happen before November. The best chance is in the lame duck session, which will depend greatly on the results of the election. This is a real possibility — the Postal Accountability and Enhancement Act (PAEA) was passed in the lame duck session of 2006. If H.R. 5714 isn’t approved before January 20, the process will start all over again. While the window for reform is small, this is the closest we’ve seen a reform option since 2006.