CBO: House postal reform bill to save $20B in decade

Monday - 4/2/2012, 11:52am EDT

The Congressional Budget Office estimates a postal reform proposal in the House would save about $20 billion through 2022.

The bill (H.R.2309) — introduced last summer by Rep. Darrell Issa (R-Calif.) — would eliminate Saturday mail delivery, close mail processing facilities, increase postal employees' contributions to their health and life insurance premiums, and allow the Postal Service to use nearly $11 billion in surplus retirement contributions.

CBO found the spending cuts would come mainly from moving to a five-day delivery week, saving as much as $2.5 billion annually by fiscal 2015.

The bill's provision to limit how much USPS contributes to employees' health and life insurance would save about $650 million in 2014, with potential savings increasing to nearly $1 billion by 2016, CBO said. Currently, the Postal Service pays 78.5 percent of the health insurance premiums and 100 percent of life insurance premiums. H.R. 2309 would limit those contributions to 70 percent for health insurance and 33 percent for life insurance premiums.

The bill also changes how the Postal Service prefunds its future retirees' health fund. Under current law, the Postal Service must make annual payments of about $5.6 billion to $11.1 billion in 2012, CBO said. The proposal would increase the prepayments in 2015 and 2016 but cut the payment amounts starting in 2017.

The Postal Service has outlined a five-year plan to become financially stable, but Postmaster General Patrick Donahoe has urged Congress to give USPS the authority to make services cuts and reduce its annual payments to the retiree health benefits. The agency is already moving ahead with cuts of more than 220 processing centers that will result in a loss of about 30,000 positions.

Should the Postal Service default on its payments for more than 30 days, Issa's legislation also would set up a Postal Service Financial Responsibility and Management Assistance Authority that would have a "broad mandate" to restructure the Postal Service.

CBO said it could not judge whether this new structure would be more or less successful than the current USPS management. However, it added, "because the bill would transfer an estimated nearly $11 billion to the Postal Service in 2012, CBO does not expect that USPS would be in a financial situation that required the new management authority to be created for the foreseeable future."

The CBO analysis is similar to its conclusions in a December 2011 report.

A Senate postal bill, sponsored by Sen. Joe Lieberman (I-Conn.) and three other senators, received a cost estimate from CBO of costing the government $6.3 billion over the next decade. That proposal included a provision to allow the Postal Service to create its own health plan, separate from the Federal Employees Health Benefits Program — a provision that is part of the USPS' five-year plan.

The Postal Service lost $5.5 billion in fiscal 2011 and expects to lose $17 billion by 2015.

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