Postal Reform Page: 7 of 15
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standalone entity responsible for funding its own retirement obligations. In a November 1,
2002 letter [http://postcom.org/public/csrs/OPM%201etter%20on%20USPS-CSRS.pdf] to
the Postmaster General, OPM Director Kay Coles James came to a startling conclusion: that
future payments under current legislation would overfund USPS liability for its CSRS
employees by $71 billion. A principal reason is that interest earnings on past contributions
have been credited at a statutory rate of 5%, when in fact the average rate of returns on the
bonds held by the trust fund has been substantially higher.
In reviewing the OPM calculations, GAO [http://www.gao.gov/new.items/d03448r.pdf]
put the potential overfunding even higher - as much as $103 billion - since under current law
USPS is not responsible for retirement benefits based on prior military service of postal
employees. GAO cautioned, however, as did the Congressional Budget Office
[http://www.cbo.gov/showdoc.cfm?index=4033&sequence=0], that health benefits of retirees
still represent an unfunded liability on the order of $40 billion to $50 billion.
Nevertheless, the effect of OPM's surprise announcement on the postal community has
been electric. The Postmaster General said that reducing the annual payments to an
actuarially sound level would save $2.9 billion in FY2003, and $2.6 billion in both FY2004
and FY 2005. He said that this would enable USPS to reduce its debt to the Treasury by $3
billion this year, and to defer another rate increase from January 2004, as currently planned,
to some time in 2006.
However, legislation would be required to reduce the payment. OPM drafted a bill,
"The Postal Service Civil Service Retirement System Funding Reform Act of 2002,"
reportedly with the support of OMB, that would reduce the payment. One potential obstacle
to its passage is the possibility that offsetting savings would need to be found elsewhere in
the budget. The Congressional Budget Office
[http://www.cbo.gov/showdoc.cfm?index=4033&sequence=0], said that if USPS were to use
the savings to hold down postage rates, the impact on the unified budget could be a deficit
increase of as much as $10 billion to $15 billion over the FY2003-2007 period, and as much
as $36 billion to $41 billion over the 10-year period from FY2003 to FY2013. On February
12, 2003, bills were introduced with bi-partisan support in the House (H.R. 735) and the
Senate (S. 380) that would allow USPS to reduce its CSRS contribution, but require that the
saved funds be used to pay down its debt to the Treasury in fiscal years 2003, 2004, and
The Postal Reorganization Act of 1970
Postal Service management, its board of governors, GAO, and most stakeholders assert
that the Postal Reorganization Act of 1970 no longer provides a viable business model for
a successful postal enterprise at the turn of the century. That Act had taken postal affairs out
of the direct control of either Congress or the President. It made USPS an independent
establishment of the executive branch, directed by a postmaster general selected by, and
serving at the pleasure of, a part-time board of governors appointed by the President with the
consent of the Senate. USPS was permitted to operate using business principles, and charged
with generating enough revenues to support the costs of the service it provides by allocating
those costs among the many users of the postal system. That allocation has been
accomplished through periodic rate cases before the Postal Rate Commission (PRC), a five-
member regulatory commission that considers cost data and the conflicting views of
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Postal Reform, report, February 25, 2003; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc806221/m1/7/: accessed April 25, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.