News & information
NALC President Fredric Rolando testified today before the Senate Homeland Security and Government Affairs Committee, which has Postal Service oversight. This was the second of two hearings to focus on S. 1486, a postal bill introduced this summer by Sen. Tom Carper (D-DE), the committee chairman, and Sen. Tom Coburn (R-OK), its ranking member.
“We appreciate very much your hard work in putting together S. 1486,” Rolando told the committee, “but we feel that the bill fails to permanently address the primary cause of the Postal Service’s current financial crisis—the unaffordable 2006 mandate to pre-fund future retiree health costs.”
This unique mandate, required of no other federal agency or private enterprise, is responsible not just for 80 percent of USPS’ losses incurred since 2007, but for 100 percent of the agency’s recorded loss so far this year. In fact, according to the Postal Service’s own financial reports, USPS would have reported a $660 million profit for the third quarter of Fiscal Year 2013 if it weren’t for the pre-funding payments.
But there are many other problems with the bill besides its so-called pre-funding reforms, Rolando said.
“That inadequate pre-funding proposal, combined with the prospect of large postal hikes, the elimination of Saturday mail delivery and business door delivery, the phase-out of household door delivery, and the promotion of a morale-killing two-tier postal workforce would drive the Postal Service into a death spiral,” he said.
While Internet diversion has indeed caused a decline in first-class mail volume, thanks to increased reliance on e-mail and online bill payments, “the Internet is also creating new business opportunities for the Postal Service,” Rolando said, “and with it, surging package revenues.”
President Rolando was on the hearing’s second panel, alongside National Postal Mail Handlers Union President John Hegarty, National Association of Postmasters President Robert Rapoza, and economists Douglas Holtz-Eakin and Dean Baker.
“The rate at which the Postal Service is required to pre-fund retiree health benefits has no economic logic,” Baker told the committee. “Treatment of the Postal Service has been asymmetric with other private firms.”
Baker also noted that pre-funding accounts for about 8 percent of the Postal Service’s revenue. “If you were to take any thriving business—an Apple or an Amazon—and say, ‘OK, we made an accounting mistake; you have to pay 8 percent of your revenue into “X” fund,’ that would be a huge burden that would jeopardize even their viability. So I think we have to recognize that.”
Most of those on the second panel, in fact, focused on how the Postal Service’s financial picture is gradually improving—that the benefits of Internet commerce and package delivery are not just offsetting the declines in First Class Mail, they’re generating an operating profit.
Some of those who testified alongside President Rolando agreed with him that S. 1486 represents a destructive approach to postal reform that, if passed, would degrade the network, and that meaningful reform requires either the repeal or the massive reduction of the pre-funding mandate.
Postmaster General Patrick Donahoe was a witness on the first panel, along with representatives from the Office of Personnel Management (OPM) and the Government Accountability Office (GAO).
A good deal of discussion throughout the hearing also dealt with the rising cost of health care and the Postal Service’s proposal to create a separate USPS health plan, either inside or outside the Federal Employees Health Benefit Program (FEHBP). While discussions on this particular topic are ongoing, President Rolando stressed later that most of the savings the Postal Service believes can be achieved through a separate postal plan outside of FEHBP can be achieved through sensible reforms within FEHBP.
Rolando indicated that NALC and the Postal Service were working together to develop a set of FEHBP reforms that would achieve this goal, which the union could support as part of an overall package of acceptable reforms to strengthen the Postal Service.
“Making changes could result in a meaningful reduction to the unfunded liability for future retiree health benefits,” Rolando said, “thereby addressing the pre-funding problem, the main cause of the Postal Service’s recent financial losses.”
At one point during the hearing, Sen. Jon Tester (D-MT) asked Donahoe to clarify something the postmaster general said in his testimony during the hearing a week earlier.
“You stated that it was your belief that under the current [law], an arbitrator can not consider the financial health of the United States Postal Service,” Tester said.
“I misspoke,” Donahoe replied. “What I should’ve said was, they can’t consider it but they’re not required by law not to consider it. I think that’s where I misspoke.”
“Because I think the last three arbitrations there was a lot of financial information brought forth by the Postal Service,” Tester said.
In fact, the financial situation of both parties in an arbitration always is presented during hearings, and arbitrators are required to consider every exhibit and piece of evidence presented during proceedings before rendering a decision.
Sen. Carper admitted that the S. 1486 is not perfect. “It’s not the finish line,” he said, “but it can be improved.”
Carper did leave the door open for finding a way to preserve six-day mail delivery. “If there’s a true interest on the part of our friends in organized labor to be able to preserve six day a week service,” he said, “I don’t know if there’s some way you can negotiate a compensation package maybe for the folks that are delivering on that sixth day that makes this competitive, that makes the Postal Service able to do it and not do it at a loss.
“I know that you all have tried to do that before,” the senator said. “I would just ask that you look at that again as you go forward. I know there’s good spirit involved in those negotiations; I’d just urge you to keep at it.”
And keep at it we will, Rolando said later. “This is an opportunity for NALC’s activists to get in the game now, while the committee is still working on the measure,” he said. “All of us have a stake in what will happen with this bill over the next few months,” he said, “so it’s critical that we each write, call and e-mail our senators and tell them to oppose S. 1486 as it’s currently drafted.”
Click here to read President Rolando’s officially submitted written testimony.
Click here to visit the Senate committee’s web page to watch the hearing and to download other witnesses’ testimony.