GAO Delivers Late on USPS Reforms | Council For Citizens Against Government Waste

GAO Delivers Late on USPS Reforms

The WasteWatcher

The Government Accountability Office (GAO) has long been justifiably critical of the United States Postal Service (USPS).  The agency’s financial vulnerability has been on GAO’s High-Risk List since 2009, which is mentioned in its September 23, 2021, report, “U.S. Postal Service Primer: Answers to Key Questions About Reform Issues.”

But GAO admits that its report is “based largely on GAO's prior work,” which admittedly means some of its recommendations are outdated and raising questions about why it is being released now, just as Congress is considering H.R. 3076, the Postal Service Reform Act of 2021.

H.R. 3076 does not include everything needed to reform the USPS, like greater use of outsourcing where the private sector can perform certain functions more efficiently, controlling labor costs, and closing more unneeded facilities (although it at least does not prevent the USPS from doing so), but it is a good first step.  The Council for Citizens Against Government Waste (CCAGW) is concerned that the GAO report could slow the progress of this bipartisan bill which has received broad support.

For example, the legislation sensibly codifies the delivery of mail and package together at least six days a week in Section 202, which has always been done by the USPS.  The bill is supported by the USPS, shippers, mailers, and taxpayer organizations like CCAGW.  But the GAO report resurrects the outdated idea of reducing delivery from six to five days a week.  In the current time of ecommerce and the significant contributions package deliveries make to the USPS bottom line, moving to five-day delivery would be detrimental to the USPS, which GAO should have noted.  In fiscal year (FY) 2020, the USPS had income of $11 billion above its costs for competitive mail and services, including packages.

One has to ask whether the release of the GAO report at this time is an attempt to stake out some more active role for itself in postal affairs.  But the GAO does not have the expertise or capability to do so.  Section 203 of H.R. 3076 requires the  Postal Regulatory Commission (PRC), the independent expert agency for the USPS, to review whether “all direct and indirect costs attributable to competitive and market-dominant products are properly attributed to those products, including by considering the underlying methodologies in determining cost attribution and considering options to revise such methodologies. If the Commission determines, after notice and opportunity for public comment, that revisions are appropriate, the Commission shall make modifications or adopt alternative methodologies as necessary.”  Oversight of the PRC itself will be provided by the USPS Office of Inspector General.  The PRC should remain the sole authority for these purposes, given their  knowledge and expertise.

H.R. 3076 removes the postal service’s obligation to pre-fund retiree health care obligations, which is not required for any other government agency or private sector company. It moves retires from the USPS plan to Medicare.  Rather than cite this provision of the legislation, the GAO report discusses its own 2018 proposal to improve the financial status of the health benefits plan, and then provides three options.

The GAO report also discusses whether the USPS should be involved in nonpostal businesses and services, suggesting that “USPS and policy makers need to carefully weigh the costs, benefits, and limitations of any new offerings.”  Again, the report fails to acknowledge the provisions in H.R. 3076 that allow governmental nonpostal products and services, if they “reasonably contribute” to USPS costs.  It would have been clearer if the GAO had cited this as the preferred solution, especially since it prevents the USPS from getting into banking and similar commercial businesses, which has been supported by President Biden and members of Congress like Sen. Elizabeth Warren (D-Mass.).  Postal banking was rejected in the December 2018 report of the Department of the Treasury Task Force on the United States Postal System and the GAO’s May 2020 report, “Congressional Action is Essential to Enable a Sustainable Business Model.”  When the USPS inspector general suggested in January 2014 that the agency could provide financial services, the USPS noted its “core function is delivery, not banking.” This concept should be buried forever, and GAO should have done so.

H.R. 3076 makes progress on postal reform and a more sustainable future and should have been acknowledged by GAO.  The agency has done a lot of work to highlight the unsustainable financial condition of the USPS, but the timing of this report is questionable, and the material is outdated.  But even with H.R. 3076 moving through the House, until labor costs, closing excess facilities, outsourcing, and other issues are addressed, the financial condition of the USPS cannot be improved as much as it should be.

 

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