From the President’s Plan for Economic Growth and Deficit Reduction
Provide Postal Service financial relief and undertake reform.
The Administration recognizes the enormous value of the U.S. Postal Service (USPS) to the Nation’s commerce and communications, as well as the urgent need for reform to ensure its future viability. USPS faces a long-term, structural operating deficit that has been exacerbated by the precipitous drop in mail volume in the last few years due to the economic crisis and the continuing shift toward electronic communication. Absent legislative intervention, USPS will be insolvent by the end of September 2011 when it will be unable to make the statutory $5.5 billion Retiree Health Benefit prefunding payment to the Office of Personnel Management, will have exhausted its cash reserves, and will have hit its cumulative statutory Treasury borrowing ceiling of $15 billion. Bold action is needed to ensure that USPS can continue to operate in the short-run and achieve viability in the longrun.
To that end, the President is proposing a comprehensive reform package that would:
1) restructure Retiree Health Benefit pre-funding in order to accelerate moving these Postal payments to an accruing cost basis and reduce near-year Postal payments;
2) provide USPS with a refund over two years of the $6.9 billion surplus in Postal contributions to the FERS program;
3) reduce USPS operating costs by giving USPS authority, which it has said it will exercise, to reduce mail delivery from six days to five days;
4) allow USPS to offer non-postal products and increase collaboration with State and local governments; and
5) give USPS the ability to better align the costs of postage with the costs of mail delivery while still operating within the current price cap, and permit USPS to seek the modest one-time increase in postage rates it proposed a year ago. These reforms would provide USPS with over $20 billion in cash relief over the next several years and in total would reduce the Federal deficit by $19 billion over 10 years.
The Administration is proposing that the employee contribution toward accruing retirement costs would increase by a total of 1.2 percent (0.4 percent a year over three years beginning in 2013), but the employee’s total pension would remain unchanged. In addition, the Administration is proposing to eliminate the FERS Annuity Supplement for new employees. While Federal agency contributions for currently accruing costs of employee pensions would decline, these employers would pay an additional amount toward unfunded liabilities of the retirement system that would leave total agency contributions unchanged over the 10-year budget window. The Administration does not anticipate this policy change will negatively affect its human capital planning and management, nor inhibit the Government’s ability to serve the American people. This proposal is estimated to save $21 billion over 10 years.