Issa Introduces Postal Reform Act

Rep. Darrell Issa (R-CA) has introduced legislation to implement sweeping, structural reforms and prevent a potential taxpayer bailout of the Postal Service.

Rep. Darrell Issa (R-CA) has introduced legislation to implement sweeping, structural reforms to the Postal Service. Introduction of the legislation follows on the heels of the news that the Postal Service will stop paying the employer share of its employees’ retirement fund.

“USPS has felt the need to give themselves a taxpayer-funded bailout. This unprecedented action indicates the urgent need for these reforms,” Issa said.

Dubbed the Postal Reform Act, its intent is to prevent another taxpayer bailout as Issa fears that the Postal Service’s dire financial status could trigger one to keep the organization afloat. It represents the most fundamental reform of the postal service that has been proposed since USPS was first created from the old Post Office Department.

The legislation creates the Postal Service Financial Responsibility and Management Assistance Authority (Authority) which will have a broad mandate to restructure the Postal Service and reduce costs in order to bring the institution back to fiscal solvency when the Postal Service goes into default to the Federal government. The Authority will be disbanded once USPS meets several benchmarks that ensure financial health.

The legislation creates a separate body, the Commission on Postal Reorganization (CPR), to review postal infrastructure and recommend closures and consolidations to Congress. It is estimated that this will ultimately save the Postal Service at least $2 billion a year. If Congress does not reject the CPR’s recommendations, they become law. The legislation will also remove several legal hurdles that USPS currently faces when it comes to reducing costs, including allowing financially unsustainable retail postal facilities to be closed.

“This legislation encourages USPS to modernize its retail network and enables USPS to act more like a business,” Issa said.

The legislation also will eliminate the benefit disparity between the postal workforce and other federal employees, which would have saved $700 million in fiscal year 2010, and it will ensure that postal wages are comparable to the private sector. The bill will also make several changes to USPS revenue and contracting policies.

Quantifiable provisions in the Postal Reform Act will save the Postal Service at least $6 billion per year when fully enacted according to official estimates. The Authority will be required to make additional adjustments to bring costs into line with expenditures in order to avoid the prospect taxpayer bailouts in the future.

“The Postal Service lost $8.5 billion last year. It is going to lose, at least, $8.3 billion this year. And it is projected to lose $8.5 billion the year after that,” Issa said. “Congress can’t keep kicking the can down the road on out of control labor costs and excess infrastructure of USPS and needs to implement reforms that aren’t a multi-billion dollar taxpayer funded bailout.”

Additional highlights of the Postal Reform Act include:

  • Postal BRAC: Creates the Commission on Postal Reorganization to eliminate costly excess capacity and facilities. Over its first year the CPR will recommend closures worth $1 billion/year for post offices. Over the second, it will recommend $1 billion/year closures for mail processing and a 30% reduction in management facilities.
  • Solvency Authority: Creates an Authority modeled on and named after the DC Control Board with a mandate to cut costs, protect universal service, and return USPS to financial solvency. The Authority is triggered into existence when USPS goes into default on any obligation to the federal government for more than 30 days. It has the authority to require renegotiation of existing collective bargaining agreements and the power to unilaterally modify those agreements if renegotiation fails. To accomplish its mission, the Authority may use a supplemental borrowing authority of $10 billion, backed by USPS property as collateral.
  • 5-Day Delivery: Allows USPS to move to 5-day delivery of mail.
  • Pay Comparability: Clarifies existing law to include wages and benefits in determining total compensation comparability with the entire private sector.
  • Health and Life Insurance: Requires USPS employees to pay the same health and life insurance premium percentage as other federal workers. This provision is phased in to apply to union employees after their current bargaining agreements expire.
  • Mediation Arbitration: Modifies the collective bargaining process to the 2003 Presidential Commission recommended mediation-arbitration process. Also requires arbitrators to take into account total compensation comparability and the financial situation of the Postal Service in any decision.
  • Cost Coverage: Requires all market-dominant products to cover costs, while maintaining the CPI price cap.
  • Underwater Products: For classes below 90% cost coverage, rates are increased by 5% annually above the price cap.
  • Non-Profit Discount: The non-profit advertising discount is reduced by 5% a year from 40% to 10% of the most closely corresponding class.
  • Political Committees: Ends the rate preferences for national and state political committees.
  • Advertising: Authorizes USPS to sell advertising space on USPS facilities and vehicles. All advertising must maintain at least 200% cost coverage and be consistent with USPS’s integrity.
  • State Government Services: Authorizes USPS to provide services for state governments that enhances USPS’s value to the public. Such services must not interfere with or detract from the value of postal services.
  • Contracting accountability and transparency: Reaffirms accountability for delegations of contracting authority and requires their disclosure when outside the functional contracting unit. Requires disclosure of most noncompetitive purchase requests above $250,000.
  • Contracting ethics: Requires USPS to establish regulations to prevent conflicts of interest in the contracting area, with ethics officials reviewing any ethics issues that arise.

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.