Kevin R. Kosar
Analyst in American National Government
Since FY2007, the U.S. Postal Service (USPS) has lost more than $25 billion. Were it not for congressional action to reduce and defer statutorily required retiree health benefits, the USPS would have lost an additional $9.5 billion. As the USPS’s finances have deteriorated, its ability to absorb operating losses has been diminished. The USPS’s current debt is $13 billion, $2 billion below its maximum statutory borrowing authority. The agency owes $11.1 billion in payments to the Retiree Health Benefits Fund by September 20, 2012, and it currently has less than $1 billion in cash. These deficits are particularly problematic since Congress designed the Postal Service to be self-supporting in 1970 and enacted significant postal reforms in 2006.
To help stem its losses, the USPS has taken a number of steps. Foremost, the Postal Service has downsized its workforce through attrition. Since FY2006, the number of career postal workers has shrunk 21.9%, to about 544,000 from 696,138. However, the USPS has said it is unable to return to solvency through its own actions, and it has asked Congress to enact major reforms.
Numerous postal reform bills have been introduced in the 112th Congress; House and Senate appropriators and President Barack H. Obama also have advanced postal proposals. Among postal authorizing legislation, H.R. 2309 and S. 1789 have progressed the furthest toward enactment. The Senate passed S. 1789, the 21st Century Postal Service Act, on April 27, 2012. The House Committee on Oversight and Government Reform reported H.R. 2309, the Postal Reform Act of 2011, on January 17, 2012, and the House Rules Committee reported H.R. 2309 on March 29, 2012. Both bills include major reforms, such as reductions in service, expansion of the USPS’s authority to provide products and services, and alterations to the postal employees pension and healthcare plans.
At present, the USPS appears to be suffering from both a short-term liquidity crisis (i.e., dwindling cash and borrowing authority) and a long-term structural deficit (i.e., stagnating revenues and rising overhead costs). To address both of these financial challenges, the USPS would have to (1) improve its liquidity immediately; (2) fortify its long-term revenues; and (3) control the growth of its long-term costs, all while (4) continuing to provide universal postal service to the public.
Both H.R. 2309 and S. 1789 contain provisions to make progress toward achieving each of these goals, albeit in different ways and to different degrees. H.R. 2309 would aim to reduce the USPS’s costs through reducing the number of delivery and postal facilities and enacting a variety of USPS compensation reforms. S. 1789 would largely preserve present-day postal services and enact a number of incremental cost-cutting policies, such as reducing the USPS workers’ compensation outlays.
Date of Report: July 9, 2012
Number of Pages: 16
Order Number: R42590
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