The 2022 Postal Service Reform Act provided $107 billion in financial assistance to the chronically troubled U.S. Postal Service (USPS) although by law USPS has long been required to be self-supporting. Signed by President Biden on April 6, 2022, the act cleared the House by 342-92 and the Senate by 79-19 amid euphoric hype and promises.
On April 20, 2023, however, the U.S. Government Accountability Office (GAO) determined that USPS should stay on its biannual High Risk List, a compilation of the most seriously troubled federal agencies.
GAO has an unusual and refreshing role to play in the federal government. This independent, non-partisan agency determines how well taxpayers’ dollars are spent and how government can save money and work more effectively. As the taxpayers’ auditor, it is a just-the-facts organization.
And that is in dramatic contrast to what politicians promised in early 2022 about the Postal Service Reform Act (PSRA).
Nancy Pelosi lauded the measure for taking “long-overdue actions to strengthen the pillar of our democracy so that it continues to serve our communities for decades to come.”
Then-Congresswoman Carolyn Maloney (D-NY), who co-sponsored the legislation in the U.S. House of Representatives said upon its passage, “I am confident that this historic reform will help the Postal Service to serve all Americans for generations to come.”
Then-Senator Rob Portman (R-OH), a co-sponsor of the measure, said it would “turn around the substantial losses at the U.S. Postal Service and ensure self-sustaining, high-quality service for all Americans.”
The $107 billion in financial assistance from the PSRA relieved USPS of much of its retiree healthcare costs, shifting those to Medicare. While noting the financial help from PSRA, and commending USPS for issuing a 10-year strategic plan in March 2021, GAO’s High Risk Report said, “USPS still cannot fully fund its current level of services and financial obligations.”
Furthermore, in Fiscal Year 2022, USPS only paid $500 million of a $1.6 billion obligation towards its unfunded liability for Federal Employees Retirement System pension benefits. At the end of Fiscal Year 2022, USPS had $18 billion in unfunded retirement plan obligations, another looming financial albatross.
Meanwhile, for Fiscal Year 2023 USPS projected in 2021 it would break even. However, losses for the first five months are well ahead of revised USPS projections. The net loss could be $6 billion or more for Fiscal Year 2023.
Furthermore, USPS wants to invest $40 billion into a comprehensive new network build-out. Where this money is going to come from amid mounting losses and chronic concerns is anyone’s guess.
Substantial postal reform should include allowing USPS to invest its nearly $300 billion in assets for employees’ retirement and healthcare benefits into a diversified mix of stocks and bonds. Right now, such investments are restricted to low yield government bonds. If states had to invest this way for teachers and government employees, the costs would be dramatically higher, or the benefits quite lower.
The upshot is that Congress needs to revisit postal reform and to tightly monitor the financial and operational performance of USPS.
Postal reform should include giving USPS investment flexibility on its retirement plans, codifying new and clear mail delivery standards, making sure that USPS costs are properly allocated to its respective products, and a wholesale look at cost reductions. As Congressman Darrell Issa said in opposing the PSRA, “I oppose the bill because we need reform, not rhetoric.”
USPS has been on GAO’s High Risk List since 2009. It is time to do the heavy lifting of true reform and get it off the list once and for all.
About the Author: Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.
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