The United States Postal Service (USPS) is in dire financial straits. The agency recently reported an $82 million net loss for the second quarter of fiscal year (FY) 2021, though the loss climbs to $1.7 billion once non-cash workers' compensation adjustments are taken out of the equation. Expenses are simply climbing at a faster pace than revenues. This unsustainable status-quo will result in (another) taxpayer bailout barring significant reforms.
Some policymakers alarmingly want to wipe the slate clean on the agency’s voluminous debts and ignore the USPS’ inefficiencies and byzantine pricing structure. As a strong voice for fiscal accountability, U.S. Rep. James Comer (R-Ky.) can and must push back against these irresponsible attempts to kick the can further down the road. Now is the time to address runaway postal debt instead of leaving the problem for future generations to address.
As Rep. Comer and his like-minded colleagues have repeatedly pointed out, debt is no small issue in Washington, D.C. Thanks to “stimulus” policies and aid to states and localities that they didn’t even need, trillion-dollar deficits are now the norm, and the national debt has exceeded $28 trillion. The USPS’ financial troubles are a key part of this fiscal mess, and it’s no secret that the independent agency has struggled mightily to keep costs under control. The Government Accountability Office recently found that the USPS has $188 billion in debts and unfunded liabilities, and this figure will continue to grow amid surging package delivery expenses and supersized transportation contracts. In the last three years alone, the Postal Service has produced net losses totaling $22 billion.
Both sides of the political aisle agree that urgent action needs to be taken to fix the USPS, but there’s been widespread disagreement on how best to approach the issue. Regrettably, any hope of a balanced reform agenda on the part of the Democrats has been bulldozed by an outlandish proposal that would let the USPS off the hook for worker compensation payments they have defaulted on.
This proposal, known as the “USPS Fairness Act,” would excuse the USPS from the obligation of “prefunding” retiree health benefits and erase past debts associated with that obligation. Backers of the legislation claim that this will help the beleaguered agency get back on its feet, since prefunding benefits have allegedly been a key cause of soaring USPS net losses. In reality, though, the USPS devotes about $800 million per year toward their dedicated retiree health fund. This figure amounts to less than 10 percent of their $9.2 billion net loss incurred in fiscal year (FY) 2020. While it is true that 2006 legislation mandated an aggressive prefunding timeline for the USPS, the agency is no longer bound to such a strict funding system. From 2017 onward, the USPS has only had to amortize (i.e. gradually write off the cost) remaining healthcare-related retirement costs for their workers over a 40-year period until 2056.
And, even without the prefunding requirements singled out by lawmakers under the “USPS Fairness Act,” the USPS would still have bled through revenues over the years. On the eve of the coronavirus pandemic, annual USPS controllable losses (i.e. losses within management’s control) exceeded $3 billion and were rapidly on the upswing. Excusing funding obligated related to retiree benefits would do nothing to address this abysmal performance and ignore the many real problems facing the USPS.
Fortunately, Rep. Comer has signaled his willingness to confront the issues threatening to hobble America’s mail carrier. In February he stated, “I am eager to work with both my Republican and Democratic colleagues to reform the Postal Service, ensure its fiscal sustainability, and improve service for the American people. We must tackle and address the real issues facing the Postal Service.” Rep. Comer can start by calling on the USPS to be more transparent on their pricing strategies and have prices reflect delivery costs. Additionally, Rep. Comer should call for network consolidation and more unified logistical operations in line with the recently released USPS 10-year business plan.
For the sake of Kentucky communities and taxpayers nationwide, leadership from Rep. Comer on USPS reform is needed now more than ever.
Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.