Chairman Chaffetz, Ranking Member Cummings, and Members of the House Oversight and Government Reform Committee,
On behalf of National Taxpayers Union (NTU), I write to provide our comments on H.R. 756, the Postal Service Reform Act of 2017. The text of the bill has yet to be made available to the public, but based on Committee announcements, we understand that the template for H.R. 756 is the Postal Service Reform Act introduced in the previous Congress. Although we applaud the view of the Chairman and many Members of the Committee that the financial trajectory of the United States Postal Service (USPS) is unsustainable, in its current iteration the bill being considered today will not adequately improve this course.
The Committee fully recognizes USPS lost $5.3 billion in fiscal year 2016 – marking the tenth consecutive year of losses. At the same time, USPS has enormous unfunded liabilities totaling well over $100 billion and has been unable to make statutorily required payments for these liabilities. These problems will worsen unless significant changes are quickly enacted.
Claims that USPS does not receive appropriations from Congress for its operations are clever linguistic exercises that conceal the very real stakes taxpayers have in the Service’s woes. For example, USPS has a low-interest line of credit to the Treasury. In addition, its status as a former federal agency (with employees participating in federal retirement plans) makes its connection to taxpayers more apparent than Fannie Mae or Freddie Mac, which were bailed out after the 2007 financial meltdown.
As Members of the Committee rightly acknowledge, USPS is in desperate need of a fundamental shift in strategy and operations. As you assess the current state of the USPS and options for reform, we hope you will keep the following principles in mind.
First, under no circumstance should USPS receive a taxpayer-funded bailout. The Committee acknowledges that USPS has “exhausted its $15 billion in statutory borrowing authority.” Any further borrowing capacity will be quickly exhausted and leave taxpayers further indebted for poor decisions made at USPS.
Next, greater recognition needs to be given in law to the importance of the prefunding requirement for USPS’s retiree health care costs, and in encouraging structural reforms to the Service’s benefit programs. USPS continues to make the case that some of its costs are beyond its control (such as prefunding retiree health care costs), but as NTU noted recently, “the losses directly within management’s grasp continue to worsen.” Likewise, H.R. 756 fails to address USPS’s defaulted payments on prefunding requirements.
USPS’s defenders claim that prefunding is an unfair burden to bear, but from the taxpayer’s perspective, more agencies and government-chartered entities should be concentrating attention on this type of planning. Some retirement obligations at the U.S. Department of the Defense have carried a prefunding requirement, while state and local governments swamped with pension and health care bills for their employees would also do well to examine the concept.
Finally, this exercise helps to prompt serious thinking about whether the level of benefits provided in the first place – as opposed to their method of funding – is viable over the long term. In this bill’s evolution, much discussion has taken place over how to calculate the Service’s funding obligation for its retirees, compared to that of other employees in the Civil Service and Federal Employees Retirement Systems. This misses the point – even though FERS agency funding levels are by their nature “self correcting”, their contributions to the Civil Service Retirement and Disability Trust Fund are denominated in Treasury bonds which, when redeemed to meet future benefit payouts, will still represent a massive claim on taxpayer resources.
For H.R. 756 to succeed in relieving the fiscal pressures on USPS and taxpayers, much deeper consideration needs to be given toward limiting the Service’s forays into exotic business lines, reestablishing performance discipline for core delivery functions, boosting accountability for rate increases, reducing mandated costs, eliminating subsidies for unfair competition, and enhancing protections against taxpayer bailouts.
While NTU has concerns about other portions of H.R. 756, we believe the principles articulated above should guide the Committee’s decisions about the future of USPS.
Counsel and Government Affairs Manager