Federal Manager's Daily Report

Opinion | Commentary
Reno, Nevada - June 2020: Election poll workers count vote by mail ballots from United States Postal Service boxes during Nevada's 2020 primary election. Image: Trevor Bexon/Shutterstock.com

Paul Steidler, Lexington Institute

The U.S. Postal Service is being whipsawed like a child in a nasty custody case as Democrats and Republicans fight over how it operates and how it should change. A time out is in order – for the parents.

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First, some good news. Contrary to a bevy of public hysteria from April to June, the U.S. Postal Service is not going to grind to a halt financially before the election. On August 7, the U.S. Postal Service declared in its Form 10-Q legal report to the Postal Regulatory Commission, “The Postal Service expects that it will have sufficient liquidity to continue operating through at least August 2021.”

Postal workers have admirably and effectively soldiered on throughout the pandemic. While delivery times were modestly longer in the fiscal quarter ended June 30, 2020, this is to be expected during a pandemic.

The Postal Service also has the experience and network to handle a surge in mail voting and is ready to do so. If 60 percent of the electorate – or 90 million people – vote by mail this will be less than one percent of the mail volume the Postal Service handles in a typical month. Mail-in voting is also going to be spread out over several weeks.

Postmaster General Louis DeJoy trumpeted the Postal Service’s capabilities on an August 7 conference call, saying the organization has, “ample capacity to deliver all election mail securely and on time.” Whatever problems that may arise with mail-in voting are more likely to be the fault of election boards, many of which are implementing new and untested vote-by-mail programs. This is where public concern should be focused.

Against this backdrop, fear and demagoguery about the Postal Service collapsing and mail-in voting being botched due to the Postal Service should end.

There is also no need to throw tens of billions of dollars in aid to the Postal Service. In fact, it would be counterproductive as it would distract from holistic reforms that need to be made and should be made by Congress in early 2021, rather than perpetuating a broken operating model.

Below are three things that Congress can do to strengthen the Postal Service. Each is important and will help to accelerate holistic postal reform.

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New Actuarial Table for the Retiree Health Benefits Fund. The Postal Service has a generous and large retiree health benefits program. Under the 2006 Postal Accountability and Enhancement Act, the Postal Service was supposed to contribute an average of $5.2 billion to the fund from fiscal years 2007 to 2016 but has not made any contributions since Fiscal Year 2010.

While the previous contribution requirements were too onerous, some level of pre-funding is essential, given the large and growing number of retirees and the benefits of investment compounding. An independent actuarial assumption should determine the annual contributions. It should also specify what the costs would be to taxpayers and plan participants if the Retiree Health Benefits plan were to be integrated into Medicare.

Determine What Each Product Costs and Continue to Track. In 2014, the Postal Service’s Office of Inspector General issued a report, Greenfield Costing Methodology, an Opportunity to Deliver Transformative Change. Based on interviews with two dozen executives at the Postal Service, it recommended steps be taken to have more rigorous analysis of granular costs, knowing the actual cost of every item, so that better decisions can be made.

The study found a “modern bottom-up costing system would provide substantial and numerous benefits to the Postal Service, like those enjoyed by companies of comparable sizes. This costing system will provide Postal Service executives with common and accepted views of costs and profitability.” In 2019, the Inspector General issued a follow-on report to stress the need for such a system. An independent, outside contractor should be retained to perform this in-depth study.

More Sensibly Invest Retiree Funds. How many people saving for retirement and investing for the long-term are putting 100 percent of their assets into low-interest government bonds, whose yields are not expected to rise any time soon? Yet, that is exactly what happens to the Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) plans of Postal Service employees.

CSRS and FERS had a combined $277 billion in assets at the end of fiscal year 2019. These funds should be invested in diversified equity and bond portfolios. This is how states and municipalities make pension investments for teachers and government workers, with higher returns. The world’s best investment firms would compete hard for the right to serve the Postal Service, an extremely prestigious potential client. Congress can start by having $25 billion invested in this manner in fiscal year 2021.

Whether tied to an emergency appropriation or other legislative vehicle, by implementing the above programs to better understand costs and improve retirement investment options, Congress will serve the American people and strengthen the Postal Service. Perhaps most importantly, Congress will even begin to break the pattern of vitriol and gridlock now gripping public policy surrounding the Postal Service.

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See also:

Vote-by-Mail, Other Issues Bring National Spotlight on USPS

USPS Announces Management Hiring Freeze, Other Steps as Losses Continue

Opinion: Principled Proposals for Postal Reform are not a Bailout


Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.

FERS Retirement Guide 2022