USPS responds to Townhall.com blog

Once again, Brian McNicoll misleads readers of Townhall.com about efforts to return the U.S. Postal Service to financial stability. Surprisingly, the conservative commentator takes issue with a bill that would cut billions of dollars in federal spending and require a federal entity to follow private-sector best practices.

The Congressional Budget Office (CBO) actually gave the postal reform legislation (H.R. 756) a positive score. The CBO estimates it will achieve $6 billion in savings for the federal government on a unified basis. While it’s true that the bill would increase spending by the Medicare trust fund, other savings to the government essentially counteract the effect on Medicare when considering the on-budget impact.

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Contrary to what Mr. McNicoll would have you believe, the Postal Accountability and Enhancement Act of 2006 did not give the Postal Service “real control” over its fate. For instance, the 2006 law created an austere price cap that restricted the Postal Service’s ability to adjust prices of products that generate over 70 percent of our revenue. The current cap does not take changes in Postal Service volumes and costs into account, and hence is wholly unsuitable to ensuring the Postal Service’s continued ability to provide prompt and reliable universal services in a self-sufficient manner. Without legislative and regulatory reform, our net losses will continue and our financial position will worsen — threatening our ability to meet America’s evolving mailing and shipping needs.

It’s also important to understand that the Postal Service did not choose its current pension and health care systems — they are the result of a federal statute. Because of declining mail volumes, the current pension and health care systems and unique pre-funding requirements imposed by Congress are unaffordable, and that’s the reason the Postal Service has defaulted on the huge prefunding payments.

The retiree healthcare provisions of H.R. 756 align with private sector best practices, in terms of Medicare integration and calculating our pension benefits on the basis of the postal population alone, as opposed to the entire government. In this regard, no rational business providing retiree health benefits would choose not to integrate with Medicare, nor is it rational to calculate our pension liabilities on the basis of individuals who haven’t worked for us.

The Postal Service is not shirking its responsibilities in this regard, nor does it seek any kind of bailout. What the Postal Service requires is real and lasting reform that ensures its retiree health benefits program is affordable to protect against any risk that those benefits cannot be funded going forward. Indeed, among the commercial and governmental entities that offer and fund health benefits for their retired employees (an ever-shrinking pool), virtually every one fully integrates with Medicare. The substantial cost savings associated with this simple reform would put the Postal Service on sounder financial footing going forward.

Studies consistently show that the U.S. Postal Service is one of the most efficient posts in the world. Moreover, the Postal Service is self-funded and postal operations are paid for with proceeds from the sale of postal products and services — not tax revenue. As for all the “advantages” McNicoll says the Postal Service enjoys because of its status, the Federal Trade Commission concluded that the Postal Service actually experiences a significant net burden as the result of the responsibilities that we undertake as a part of the United States government. Nevertheless, they are responsibilities we are proud to fulfill.

The Postal Service’s financial situation is serious but solvable. Continued innovation and aggressive management actions together with the passage of the provisions of H.R. 756 into law and a favorable outcome in the Postal Regulatory Commission’s 10-year review of the Postal Service’s pricing system will restore the organization to financial stability and allow us to continue to provide excellent service to the American public.

2 thoughts on “USPS responds to Townhall.com blog

  1. Unfortunately USPS management chooses to either misrepresent the truth or do not understand the truth regarding their health care proposal. In the same report referenced in this article, CBO identified that the health care provision of the legislation will cost the government $4.5 billion. No savings, only costs from the health care provision. Management must have missed that part when they read the report. In reality the majority “savings” identified by CBO comes from an increase in rates. The PRC is currently reviewing rates and the process to establish rates. Their conclusions, due later this year, are likely to provide greater relief than what is in this legislation, especially for the long term.

    Next, the huge pre-funding payments are gone. Effective this year the USPS health care liability will be recalculated and any amount owed (including missed pre-funding payments) will be amortized over 40 years. Current estimates are that the total payment due this year for retiree health care will be $3.5 billion which is only $290 million more than actually paid in 2016.

    Finally, the assertion that changes in health care being proposed align with private sector best practices is also problematic. First the USPS is not a private sector business it is a federal agency and it employees are federal employees. In the private sector, where Medicare is required of retirees, this fact is defined prior to retirement, and usually when the person begins working for the employer. Changes are not made retroactively post retirement as this legislation proposes. Additionally, few if any employers require Medicare plus payment for a full coverage health benefit plan for their retirees. Medigap or similar supplemental coverage at low or no cost is the more normal scenario in the private sector. Tricare for Life is an example, where Medicare is required, but all other (as in full) coverage including prescription drug coverage is free to the participant and their family.

    Tell you federal elected representatives not to support H.R 756. It is bad legislation which is unfair to current and future retirees and will economically hurt some retirees and employees and provide very little and only short term benefit the the USPS.

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