$19 billion of those savings would result from moves to five-day delivery and cluster boxes, says the Congressional Budget Office.
Cluster boxes hold a potential $8 billion in savings.
The Congressional Budget Office (CBO) has released a financial analysis of the House Postal Reform Act (H.R. 2748) that estimates that, if passed, it would return $23.6 billion in savings to the troubled U.S. Postal Service over the course of a decade.
Providing the bulk of those savings would be two of the most controversial measures in the bill introduced by California Republican Darrell Issa: eliminating Saturday delivery and wholesale reduction of direct-door delivery. Were the bill to be passed into law and enacted by year’s end, the CBO figures that five-day delivery would return $10.9 billion and cluster boxes $8.1 billion to Postal Service coffers by 2024.
The rest of the almost $24 billion in savings would emanate largely from reductions in the funding of retiree health benefits and life and health insurance for current employees, as well as the re-calculation of retirement benefits using employee-specific data.
Postal Reform Would Save USPS $23.6 Billion
Congressional Budget Office (CBO) estimates
As ordered reported by the House Committee on Oversight and Government Reform on July 24, 2013
H.R. 2748 would change the laws that govern the operation of the United States Postal Service (USPS). Major provisions of the bill would:
- Permit the Postal Service to reduce mail delivery from six days per week to five;
- Authorize the Postal Service to phase out delivery of mail directly to some customers’ doors;
- Require the use of demographic data specific to Postal Service employees for the calculation of certain retirement benefits;
- Reduce the contribution made by the Postal Service for employees’ health and life insurance premiums;
- Change the payments that the Postal Service is required to make relating to the Postal Service Retiree Health Benefits Fund (PSRHBF); and
- Eliminate annual appropriations made to the Postal Service for free and reduced-rate mail.
In addition, other provisions of H.R. 2748 would aim to help the Postal Service reduce its operating costs and increase its revenues.
CBO estimates that enacting the bill would result in off-budget savings of $23.6 billion over the 2015-2024 period and on-budget costs of $6.6 billion (cost to taxpayers). (USPS cash flows are recorded in the federal budget in the Postal Service Fund and are classified as off-budget, while the cash flows of the PSRHBF are on-budget.) Nearly all the off-budget savings derive from two provisions—reducing mail delivery to five days per week and phasing out delivery to customers’ doors for some (but not all) addresses.
Combining those effects, CBO estimates that the net budgetary savings from enacting H.R. 2748 would be $17.0 billion over the 2015-2024 period. All of those effects reflect changes in direct spending. Enacting H.R. 2748 would not affect revenues. Pay-as-you-go procedures apply because enacting the legislation would affect on-budget direct spending.
In addition, CBO estimates that H.R. 2748 would affect discretionary spending, which is subject to future appropriation actions. We estimate that implementing the bill would have net discretionary costs of $5.2 billion over the 10-year period, assuming the necessary amounts are appropriated. Eliminating annual appropriations to the Postal Service would save about $750 million, which would be offset by costs of nearly $5.9 billion from higher retirement contributions made by federal agencies (although those retirement costs would be offset by higher receipts paid into the Civil Service Retirement and Disability Fund, as shown in the memorandum on Table 1).
CBO estimates that reducing mail delivery from six to five days per week under H.R. 2748 would save about $1.2 billion annually beginning in fiscal year 2015. Beginning in 2019, we expect that annual savings would gradually decline as those funds would probably be spent by the Postal Service or returned to mailers in the form of lower rates rather than accumulating in surpluses in the Postal Service Fund. We estimate that net annual savings would fall to $900 million by 2024.
The bill also would direct arbitrators involved in future labor negotiations to consider the financial condition of the Postal Service when mediating disputes between USPS and its labor unions and would reform certain Postal Service contracting practices. Those provisions might reduce USPS costs, but CBO expects that any net savings probably would be indistinguishable from savings that would result from the Postal Service’s current efforts to negotiate more favorable labor contracts and improve procurement practices.
Congressional Budget Office estimate
Thanks for your deep insight TSP. As usual it is well thought out and not whiny at all.
Wasting time on not passing anything
It’s time to ask why doesn’t congress prefund it’s health care cost’s just like the Postal service must! And this move away from house delivery to cluster boxes isn’t safe for the public! Just look at the story from CBC news about theft from their cluster boxes From 2008 to 2013,over 4,800 incidents of stolen mail and tampering with the boxes. And here in the U.S. same many problems! Look up the story about the cluster box problem in Canada C B C news.ca 02/06 14. All the crap to save money, while people must worry about identity theft!
Since 2006 when this mandate to prefund future retirement health benefits was created the postal service was at its highest point and had just highered large numbers of craft workers that had a highering freeze since 1998. Since then the number of plants, AOs, and workers has been cut almost in half, yet we are still prefunding according to these numbers calculated in 06 if congress would recalculate the number of employees working for the postal service now and figure it out for the future at that rate and we would already have paid for the prefunding and can work on getting back in the black as the saying goes without having to go though any future changes. This isn’t even considering the fact that we have over paid into the retirement fund and no one is worrying about fixing that.
Yeah, but if I read the report correctly, the prefunding of retiree health benefits is resumed in 2017…So, they have kicked the bucket filled with an elephant down the road….The big thing to get out of the report is that the prefunding is “ON BUDGET”. This is on budget because it was a gimmic years ago to balance the budget when the post office department became the postal service. It can’t go off budget without ballooning the deficit. And that would make politicians look bad.
Clowns in Congress caused the problem, clowns in Congress are keeping the problem going and clowns in the postal service go along to get along. It’s just the people who suffer.
Some Congressman with balls should ask CBO to do a report on the effect on the budget and deficit if the retiree health benefits were taken off budget and realistically set as off budget expenses within the postal service. They should be there in the first place. In addition the Congressman should ask to see comparative on budget costs and payments by other departments.For example, how does the IRS account for their retirees health benefits???
Where did they get the “cost to taxpayers” ?????? The Post Office uses NO taxpayer Dollars…what a “crock”.
They don’t care the American people, they just care about their money.
Public: Congressional reform would save even more.
WHAT HAS HAPPENED TO THE WORLD? IT’S ALL ABOUT GREED AND CORRUPTION. HOW ABOUT CUTTING SOME OF THE EMPLOYEE’S IN THE UPPER OFFICE. DON’T GIVE THE BIG BONUS AND TRIPS TO THESE
UPPER CRUST. AND FOR HEAVEN SAKES GET RID OF THESE PEOPLE IN OFFICE LIKE ISSA’S!
THEY ARE THE ONE’S RUNNING THIS COUNTRY. IT’S ALL ABOUT TAKING BENEFITS AND REDUCING PAY TO THE MIDDLE CLASS. GREED IS RUNNING THIS COUNTRY.
USPS probably gonna have to pay 23.6 billion in OT for the first Monday in December, if this passes! Is the USPS gonna keep all of those cluster boxes ice and snow free too? Or is there a hip replacement slush fund for seniors we don’t know about?
The postal service would never see that money, and we the employees would be left with a reduction in benefits that we worked 30+ for only to have them stolen from us!! A proper reform would be the elimination of the main problem, the prefunding of retirement healthcare! Take that away and most of the USPS’s problems go away!!
what would be the cost to the American people of ending service to their mailbox. It’s a shame all they will think about is saving money on their books. The cost to society doesn’t matter because it may not directly impact the Postal Service. You know like an increase in robberies, more people doing everything online because they don’t want to go to a cluster box. Not to mention the handicapped.
The Postal Service is just that A SERVICE !!! So why are you trying to take SERVICE our of it. Stopping Home delivery is taking away a SERVICE. What about the Elderly ??? Stop the 2006 5.5 Billion dollar mandate. Give back half of the 50 Billion dollar that the USPS was forced to pay and leave it alone. The USPS has always supported itself with Stamp revenue. It wasn’t until CONGRESS started mandating the USPS to pay 5.5 billion dollars a year for a congressional spending fund that it started having financial problems. Congress is the greedy problem.