WASHINGTON– Seeking to prevent another taxpayer bailout, Rep. Darrell Issa, R-Calif., chairman of the House Committee on Oversight and Government Reform, introduced today legislation to implement sweeping, structural reforms of the United States Postal Service (USPS). The legislation represents the most fundamental reform of the postal service that has been proposed since USPS was first created from the old Post Office Department.
“The Postal Service lost $8.5 billion last year. It is going to lose, at least, $8.3 billion this year. And it is projected to lose $8.5 billion the year after that,” Issa said. “Congress can’t keep kicking the can down the road on out of control labor costs and excess infrastructure of USPS and needs to implement reforms that aren’t a multi-billion dollar taxpayer funded bailout.”
The legislation creates the Postal Service Financial Responsibility and Management Assistance Authority (Authority) which will have a broad mandate to restructure the Postal Service and reduce costs in order to bring the institution back to fiscal solvency when the Postal Service goes into default to the Federal government. The Authority will be disbanded once USPS meets several benchmarks that ensure financial health.
The legislation empanels a separate body, the Commission on Postal Reorganization (CPR) to review postal infrastructure and recommend closures and consolidations to Congress, that will ultimately save the Postal Service at least $2 billion a year. If Congress does not reject the CPR’s recommendations, they become law. The legislation will also remove several legal hurdles that USPS currently faces when it comes to reducing costs, including allowing financially unsustainable retail postal facilities to be closed.
“This legislation encourages USPS to modernize its retail network and enables USPS to act more like a business,” Issa said.
The legislation will eliminate the benefit disparity between the postal workforce and other federal employees, which would have saved $700 million in fiscal year 2010, and it will ensure that postal wages are comparable to the private sector. The bill will also make several changes to USPS revenue and contracting policies.
Issa introduced the bill the day after USPS announced it would stop paying the employer share of its employees’ retirement fund. “USPS has felt the need to give themselves a taxpayer-funded bailout. This unprecedented action indicates the urgent need for these reforms,” Issa said.
The changes in the Postal Reform Act that can be currently quantified will save USPS at least $6 billion per year when fully in effect. The Authority will be required to make additional adjustments to bring costs into line with expenditures in order to avoid the prospect taxpayer bailouts in the future.
Highlights of the Postal Reform Act include:
• Postal BRAC: Creates the Commission on Postal Reorganization to eliminate costly excess capacity and facilities. Over its first year the CPR will recommend closures worth $1 billion/year for post offices. Over the second, it will recommend $1 billion/year closures for mail processing and a 30% reduction in management facilities.
• Solvency Authority: Creates an Authority modeled on and named after the DC Control Board with a mandate to cut costs, protect universal service, and return USPS to financial solvency. The Authority is triggered into existence when USPS goes into default on any obligation to the federal government for more than 30 days. It has the authority to require renegotiation of existing collective bargaining agreements and the power to unilaterally modify those agreements if renegotiation fails. To accomplish its mission, the Authority may use a supplemental borrowing authority of $10 billion, backed by USPS property as collateral.
• 5-Day Delivery: Allows USPS to move to 5-day delivery of mail.
• Pay Comparability: Clarifies existing law to include wages and benefits in determining total compensation comparability with the entire private sector.
• Health and Life Insurance: Requires USPS employees to pay the same health and life insurance premium percentage as other federal workers. This provision is phased in to apply to union employees after their current bargaining agreements expire.
• Mediation Arbitration: Modifies the collective bargaining process to the 2003 Presidential Commission recommended mediation-arbitration process. Also requires arbitrators to take into account total compensation comparability and the financial situation of the Postal Service in any decision.
• Cost Coverage: Requires all market-dominant products to cover costs, while maintaining the CPI price cap.
• Underwater Products: For classes below 90% cost coverage, rates are increased by 5% annually above the price cap.
• Non-Profit Discount: The non-profit advertising discount is reduced by 5% a year from 40% to 10% of the most closely corresponding class.
• Political Committees: Ends the rate preferences for national and state political committees.
• Advertising: Authorizes USPS to sell advertising space on USPS facilities and vehicles. All advertising must maintain at least 200% cost coverage and be consistent with USPS’s integrity.
• State Government Services: Authorizes USPS to provide services for state governments that enhances USPS’s value to the public. Such services must not interfere with or detract from the value of postal services.
• Contracting accountability and transparency: Reaffirms accountability for delegations of contracting authority and requires their disclosure when outside the functional contracting unit. Requires disclosure of most noncompetitive purchase requests above $250,000.
• Contracting ethics: Requires USPS to establish regulations to prevent conflicts of interest in the contracting area, with ethics officials reviewing any ethics issues that arise.
Read a copy of Issa’s legislation here .