House Bill Would Delete Prefunding Requirement

A very brief and narrowly-focused bill filed April 29 by Rep. Peter DeFazio (OR 4th) would do one thing: eliminate the statutory provision (in the 2006 postal reform law) that requires the Postal Service to fully prefund future retiree health care costs.

As filed, the operative section of HR 2382, the USPS Fairness Act, states:

“Subsection (d) of section 8909a of title 5, United States Code, is repealed.”

The provision that would be repealed established the Postal Service Retiree Health Benefits Fund and the schedule of ten annual payments from 2007 through 2016 totaling $51.8 billion. After defaulting on payments in 2012, the USPS has most of that obligation remaining; its FY 2018 liabilities included over $42.6 billion in “unfunded retirement benefits” that include the defaulted annual payments, amortization payments, and “normal costs,” according to the Postal Regulatory Commission’s FY 2018 Financial Analysis Report.

US Capitol

Too good to be true?

Eliminating the statutory obligation and, in turn, deleting the associated liabilities, might seem like an easy solution to the Postal Service’s financial situation.

Though short of full funding, the PSRHB fund isn’t without assets. In the House hearing the next day (see the preceding article), Fred Rolando, president of the city carriers’ union, claimed that the PSRHB fund now has $47.5 billion in it, enough for “12-13 years,” after which, presumably, the USPS would cover it’s costs on a pay-as-you-go basis.

However, while eliminating the funding provision would delete the statutory schedule of payments and the outstanding debt represented by defaulted annual and amortization payments, other components of the Postal Service’s over $89 billion debt – such as repaying what it’s borrowed from the Treasury and the overall workers’ compensation liability – would remain on the books in red ink.

The “score”

Perhaps more problematic is the “score” that the bill would receive from the Congressional Budget Office. In developing that figure, the CBO looks at how a proposal would increase or decrease inflows to the federal coffers while adding to or reducing the perennial federal budget deficit. For reasons that defy understanding by most people, the Postal Service is “on-budget” in some circumstances but “off-budget” in others. Relevant to the prefunding issues, USPS payments to the fund are treated as if they were tax payments – “on-budget.” Ending those payments would adversely affect assumed federal revenues and thus get a bad CBO “score.”

(Of course, that Congress has already spent income it doesn’t have and won’t get for decades is apparently not a factor in CBO’s evaluations.)

However, in his testimony at the April 30 hearing, Rolando made an interesting observation:

“As it was in 2009, a simple repeal of the retiree health prefunding mandate remains the most obvious solution to the Postal Service’s financial crisis. The good news is that, in 2019, this measure would no longer result in a ‘CBO score.’ It would no longer increase the federal deficit because the CBO budget baseline now assumes that the Postal Service can no longer make its prefunding payments, which have not been made since 2012. A repeal measure, in combination with the more sensible rate-setting system expected to emerge later this year from the PRC’s legally mandated 10-year review of the pricing of Market Dominant products, would go a long way toward stabilizing the Postal Service’s finances.

Of course, Rolando doesn’t speak for the CBO, but it’s unlikely he would have made the statement he did if people on his staff who should know such things hadn’t validated its accuracy beforehand. So, assuming his comment is as legitimate as it seems, the danger to DeFazio’s bill that would be represented by a bad CBO “score” seems to be moot.

What’s next?

The future of any bill is hard to predict, but from an apolitical perspective there may be a couple of positive (or, at least, not negative) signs for HR 2382. First, it has bipartisan cosponsors (Reps. Reed (NY 23rd), Fitzpatrick (PA 1st), and Torres Small (NM 2nd)). Second, none of the co-sponsors are from the Oversight and Government Reform Committee, meaning it’s not easily pigeonholed as a “postal issue.” Third, Fitzpatrick and Reed, from the minority, are not on the same committee – in fact, Reed is on the influential Ways and Means Committee.

The bill has been referred to the House Oversight and Government Reform Committee – the same committee at whose hearing Rolando cited the DeFazio bill. And, as noted, the committee (and the House) tend to support what labor sup-ports – meaning that a nod from a large union like Rolando’s could make endorsement of HR 2382 by the committee more likely, and perhaps ease its way to the floor for a vote.

If it reaches the Senate, the ten-word bill offers little to parse or rephrase, and the elimination of a major USPS financial burden would be hard to oppose, especially if the CBO doesn’t hit the bill with an unfavorable “score.”

Beyond that, the administration seems disposed toward ameliorating the Postal Service’s financial woes as well, so should HR 2382 reach the White House it might have a good chance of being signed.

Of course, the ironic downside to the measure is that it is so narrowly-focused, and takes dead aim at the widely-accepted biggest problem for the USPS – prefunding. By doing so, it not only splits the short list of “reform” measures that has support from the USPS, its unions, and the industry, it also reduces the pressure on Congress to do anything else about the remaining items

Integrating USPS workers and retirees fully into Medicare, resurrecting a portion of the “exigent surcharge,” restructuring the retirement funds, and any other cost-reduction measures would seem less urgent if prefunding were eliminated, and a false belief that USPS finances had been “fixed” might set in.

It’s said – with reason – that Congress doesn’t act except when there’s a crisis. DeFazio’s bill might solve one major USPS problem, but inadvertently let Congress off the hook for solving the rest.


Excerpted from the May 13 edition of Mailers Hub News. Subscribers can find the full edition and archived issues here
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