Bipartisan legislation could help address a huge financial burden for the United States Postal Service, but it is stalled in the U.S. Senate, even as the health of the beleaguered agency has now become a major issue in the run-up to the November election.
Known as the “USPS Fairness Act,” the legislation would undo a requirement Congress imposed over a decade ago that effectively forces the agency to pre-fund its retiree health-care costs, which is something most other government agencies are not required to do.
For the USPS, the costs of pre-funding total in the billions, and they have helped put a strain on the agency’s finances at the same time it has had to deal with other fiscal challenges, including those linked to changing consumer habits.
The postal service’s financial issues have brought on a series of controversial operational changes by President Donald Trump’s administration. The recent changes are aimed at reducing overtime costs and other expenses, officials have said.
But Trump, who is behind in public opinion polls of voter sentiment for the upcoming presidential election, has also recently acknowledged he wants to make it harder for states to enact universal vote-by-mail in the election. That has prompted many Democrats and others to sound alarms, especially as New Jersey and many other states have announced vote-by-mail will be relied on heavily this year for collecting ballots amid the health crisis.
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The bipartisan bill, which has strong support from New Jersey’s federal lawmakers, seeks to undo the pre-funding mandate; it easily cleared the House of Representatives earlier this year.
Below are answers to key questions about the postal service’s finances and the pre-funding legislation.
How does the USPS operate? As the name suggests, the agency — which runs more than 31,000 post offices nationwide — is a federal service. It has a rich history, with the U.S. Constitution granting Congress the power to “establish Post Offices and Post Roads” in the same section that covered the coining of money and the establishment of the Navy.
In its current structure, the agency is run by a postmaster general under policies set by a board of governors, with Congress also playing an oversight role. It employs more than 630,000 men and women who help distribute more than 140 billion pieces of mail annually, according to USPS press materials. Unlike other federal operations, the postal service was set up as an independent, self-funding agency that does not regularly rely on federal tax revenue to operate. But it has also faced financial challenges posed by changing consumer habits, such as a decline in the volume of first-class mail.
What is pre-funding? The practice of pre-funding generally calls for money to pay for things like retiree health benefits to be socked away regularly in a separate account outside the annual budget. By contrast, most government agencies — including state government in New Jersey — fund the health benefits they’ve promised to provide public workers during their retirements on what’s known as a “pay-as-you-go” basis out of the annual budget. In fact, New Jersey has for years been calculating what’s known as an “unfunded liability” related to its retiree health benefits because the state does not already have all the money on hand to cover the costs projected by actuaries for providing these benefits.
Why does the USPS have to pre-fund? In 2006, Congress required the USPS to begin setting money aside to cover the projected future health-care costs of its employees. The pre-funding mandate was included in a broader reform measure that was intended at the time to put the agency on a more secure financial footing. But opponents and even some previous supporters have instead suggested it was intended to make it easier to make the case that the USPS should be privatized.
The measure, known as the Postal Accountability and Enhancement Act, called for annual payments of between $5.4 billion and $5.8 billion to be made between 2007 and 2016, according to a recent review by the nonpartisan Government Accountability Office, but none have been made since 2010. The estimated cost for pre-funding for last year’s USPS budget was projected by the nonpartisan Congressional Budget Office to be $4.6 billion. And before the pandemic hit, the CBO had projected the agency would not be able to meet any pre-funding obligations for at least the next decade.
What would USPS Fairness Act do? In short, the legislation would repeal the 2006 pre-funding mandate. Sponsors of the measure say that would allow the USPS to focus more on its core mission of delivering mail and other packages — something that has become more important than ever now that the agency is going to be relied upon to handle a dramatic increase in mail-in ballots in many states.
“They would be making a profit at this moment,” said U.S. Rep. Bill Pascrell (D-NJ) on WNYC public radio Monday. Pascrell, a longtime USPS advocate, has also called for New Jersey Attorney General Gurbir Grewal to investigate the Trump administration’s recent actions.
However, the legislative reform wouldn’t fully erase the agency’s long-term obligations to its retired employees even as it changes the accounting, and USPS officials have maintained it still faces a very difficult liquidity problem amid the pandemic.
Who supports eliminating the pre-funding requirement? Among New Jersey’s congressional delegation, the “USPS Fairness Act” was co-sponsored on a bipartisan basis by Pascrell and the 11 other members of the state’s House delegation before it was easily passed in a February vote. The measure has also won wide support from labor unions that represent postal workers.
Sen. Robert Menendez (D-NJ) said on Monday that any blame for inaction in the Senate should fall squarely on Republican Majority Leader Mitch McConnell (R-KY).
“Congress needs to alleviate this burden in order for the USPS to operate like other independent federal agencies,” Menendez said. “Unfortunately, a bill to do just that has been sitting on Majority Leader McConnell’s desk for six months without any action after it passed the House with bipartisan support.”
“If Senate Republican leadership was serious about supporting the post office, it would allow a vote on the prefunding bill and pass robust funding for USPS without further delay,” he said.