The administration’s budget proposal would provide some immediate relief and the prospect for more from several obligations that the U.S. Postal Service holds largely responsible for its financial problems of recent years.
One main issue is the obligation under a 2006 postal reform law requiring pre-funding of retiree health insurance costs, a roughly $5 billion annual obligation over 10 years on which USPS has defaulted for several straight years. The budget would stretch out the obligation, including the missed payments and the payments due for 2015 and 2016, over 40 years starting in 2017 providing some $13 billion in relief through 2016.
The budget also proposes to give USPS authority to reduce mail delivery frequency from six days to five days if mail volume falls below 140 billion pieces for four consecutive quarters (the Budget assumes this will occur near the end of 2018); allow it to shift more to centralized and curbside delivery rather than door-to-door; allow USPS management to respond more quickly to market opportunities; and make permanent a two-year rate increase approved in December 2013.
Another issue is an amount USPS has overpaid over the years to OPM for retirement-related costs under FERS because the payments have not taken into account demographic factors specific to USPS versus the federal workforce in general. Estimates of the amount at stake have varied widely among studies into the issue. The proposal would require that OPM—more specifically, the Treasury, since OPM is just the conduit for the federal retirement fund—to return $1.5 billion to USPS over two years.
Many of those proposals have been present in one form or another in postal reform bills that have advanced, although never to enactment, in Congress in recent years.
