Postal reform should deliver better results 

Fixing the United States Postal Service’s (USPS) broken business model was never going to be easy. Proposals range from complete privatization to expanding into nonpostal businesses to raise revenue for an organization that has lost money in every quarter of each year since 2009. H.R. 3076, the Postal Service Reform Act of 2021, does not provide either of those solutions, both of which raise strong objections from each side of the aisle, but it does include some positive changes that will begin to stabilize the agency’s finances.

In a rare moment of bipartisanship in a bitterly divided House of Representatives, on May 13, 2021, H.R. 3076 was reported out of the Oversight and Reform Committee on a voice vote. The legislation must still be considered by the Ways and Means and Energy and Commerce Committees before it can be voted on by the full House.

The most important provision of H.R. 3076 is Section 202, which sensibly codifies the delivery of mail and package together at least six days a week, something that has always been done by the USPS. It has the support of the USPS, the Postal Regulatory Commission (PRC), mailers, shippers, and pro-taxpayer organizations. Eliminating six-day delivery has previously been proposed as a cost-saving measure, but the increased package delivery that USPS is now providing makes that moot.

In fiscal year (FY) 2020, the USPS had income of $11 billion above its costs for competitive mail and services, including packages. If separate networks were established, that positive result would vanish and the USPS would be forced to raise prices, since it would cost more than $15 billion annually for a separate and parallel fleet of vehicles and tens of thousands of new employees. Yet a USPS competitor, the United Parcel Service, is self-servingly attempting to eliminate Section 202, which would allow it to raise its prices to the detriment of consumers, small businesses, rural Americans, and seniors. Taxpayers would also be forced to pay more for government mail like Social Security checks.

Questions about cross-subsidization of monopoly mail and packages have been raised for many years. But Section 203, combined with a new public database that tracks performance and regular reports on operations and financial status, should answer many of these questions and make it easier to identify any issues. Accountability will also be improved with oversight of the PRC by the USPS Office of Inspector General (OIG).

H.R. 3076 also requires the PRC and OIG to conduct a study of the longstanding inefficiencies caused by large envelopes (flats) and to develop a plan to address these problems which the Postal Service must implement. A 2018 USPS Office of Inspector General (OIG) report on the Flat Sequencing System found that after nearly 10 years “since its rollout, the Flats Sequencing System (FSS) — the football-field sized sorting machines for flats mail — is still falling short of expectations.”

H.R. 3076 removes the postal service’s obligation to pre-fund retiree health care obligations, which is not required for any other government agency or private sector company. It moves retires from the USPS plan to Medicare.

Governmental nonpostal products and services are permitted, but only if they “reasonably contribute” to USPS costs. This is a vital provision of the legislation, since it prevents the USPS from getting into banking and similar commercial businesses, which has been supported by President Biden and members of Congress like Sen. Elizabeth Warren (D-Mass.). Postal banking was rejected in the December 2018 report of the Department of the Treasury Task Force on the United States Postal System and the GAO’s May 2020 report, “Congressional Action is Essential to Enable a Sustainable Business Model.” When the USPS inspector general suggested in January 2014 that the agency could provide financial services, the USPS noted its “core function is delivery, not banking.” This concept should be buried forever.

Still, the bill could have done more. Labor costs, which are the most significant cause of excess expenses at the USPS, were not addressed in H.R. 3076. The bill also does not require the closure of excess and underutilized facilities (although it also does not prevent USPS from doing so). And the opportunity to achieve higher cost savings by requiring outsourcing when the private sector can perform certain functions more efficiently was also missed.

The Government Accountability Office has had the financial viability of the USPS on its High Risk List since 2009, and in its 2021 report, noted that its “financial condition is unsustainable and deteriorating.” H.R. 3076 makes progress on postal reform and a more sustainable future, but until labor costs, closing excess facilities, outsourcing, and other issues are addressed, the financial condition of the USPS cannot be improved as much as it should be.

Tom Schatz is president of Citizens Against Government Waste (CAGW).