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Lawmakers aim to dissolve 'draconian' law that placed heavy financial burden on Postal Service

The financial requirement has created a major economic drag on the Postal Service, causing it to appear to fall billions of dollars further into debt each year.
Image: United States Postal Service (USPS) worker unloads packages in Manhattan during outbreak of coronavirus disease (COVID-19) in York
A United States Postal Service (USPS) worker unloads packages from his truck on April 13, 2020.Mike Segar / Reuters file

A bipartisan group of lawmakers in the House and Senate introduced legislation that would provide the Postal Service much-needed financial relief by doing away with a mandate that required it to prepay retirement benefits decades in advance.

The issue stems from a 2006 law that required the Postal Service to create a $72 billion fund that would pay for its employees' retirement health benefits for more than 50 years into the future. This is not required by any other federal agency.

The "USPS Fairness Act," introduced by Democrats and Republicans in both chambers, would do away with the requirement and comes as some lawmakers and the biggest Postal Service union have called for President Joe Biden to quickly install new leadership in the federal agency.

“The unreasonable prefunding mandate has threatened the survival of the USPS and placed at risk vital services for the millions who rely on it,” said Rep. Peter DeFazio, D-Ore., one of the bill’s sponsors. “The prefunding mandate policy is based on the absurd notion of paying for the retirement funds of people who do not yet, and may not ever, work for the Postal Service.”

A similar measure was passed by the House on a bipartisan basis almost exactly a year ago, with 309 members of Congress in support and 106 opposed. The bill was received by the Senate five days later, but it never moved forward and died in that chamber.

Sens. Steve Daines, R-Mont., and Brian Schatz, D-Hawaii, introduced the bill Monday in hopes of quickly pushing it through the Senate this time.

The Postal Service has so far amassed $56.8 billion in its retiree health benefits fund to fulfill the mandate, according to last year’s Postal Regulatory Commission report, but it has been a struggle to get even there.

Image: United States Postal Service
A U.S. Postal Service worker wearing gloves and a protective mask pushes a cart past trucks in Crockett, Calif., on Aug. 17, 2020.David Paul Morris / Bloomberg via Getty Images

In the meantime, the financial requirement has created a major economic drag on the Postal Service, causing it to appear to fall billions of dollars further into debt each year. Much of that negative balance only appeared on the ledgers because of the 2006 mandate.

The Postal Service “missed $48.2 billion in required payments for postal retiree health and pension benefits as of September 30, 2018,” a Government Accountability Office review in 2019 concluded.

The report noted that the agency’s liabilities had drastically increased because of the mandate, showing that the Postal Service's debt had grown to more than 200 percent of its revenue since the passage of the 2006 law.

“The 2006 Post Accountability Enhancement Act did something that was absurd, draconian and no other agency or private company ever has had to do,” Mark Dimondstein, the president of the American Postal Workers Union, said. “It manufactured a financial crisis in the post office."

The Postal Service said it supports the repeal of the prefunding mandate, but only “as a companion” to Medicare integration, a proposal previously floated in Congress that would merge retiree benefits with the federal Medicare program.

“The enactment of these two provisions together would have a very meaningful positive impact on the financial sustainability of the Postal Service," said David Partenheimer, a Postal Service spokesperson.

While the American Postal Workers Union said it is not opposed to the idea of Medicare integration, it encouraged Congress to move forward with the current legislation as is.

The law creating the mandate originally passed in 2006 with broad bipartisan support during a lame duck session of Congress, just as Republicans were about to lose their majority.

Sen. Susan Collins, R-Maine, faced criticism during her reelection last year for helping shepherd the bill through Congress in 2006, though the legislation passed with near-unanimous support.

Collins told NBC News that she introduced a bill a few years after the measure became law to give the Postal Service more time to pay for the benefits, but it was never passed.

“It relieved the postal service of millions of dollars in liabilities and it was intended to ensure that the retirees got the benefits that they earned," she said of the 2006 law. "It turned out to be too aggressive a schedule which is why the postal service has not made the payments for nearly a decade."

Rep. Bill Pascrell, D-N.J., voted for the bill in 2006, and said in an op-ed he penned in 2019 that committee leaders told members of Congress “that the legislation was critical." It turned out, however, that the law “one of the worst pieces of legislation Congress has passed in a generation,” he said.

“That USPS is forced to prefund its employee pensions 50 years into the future is an insanity that is the No. 1 cause of the Post Office’s financial problems," Pascrell told NBC News. Abolishing this anchor is supported by an overwhelming majority of Congress. We must pass this not just to save USPS now but preserve it for the next century.”

Supporters of the Postal Service highlighted the economic burden it faced during the many delivery delays observed last year, with some advocates noting the need for Congress to dissolve the mandate.

Image: Postmaster General Louis DeJoy testifies during a House Oversight and Reform Committee hearing on the Postal Service on Capitol Hill.
Postmaster General Louis DeJoy testifies during a House Oversight and Reform Committee hearing on the Postal Service on Capitol Hill.Tom Williams / AP file

Then-President Donald Trump opposed providing the struggling agency any financial relief. He earned further criticism when he installed Louis DeJoy, a major Republican fundraiser, as the new postmaster general. DeJoy drew fire after he made numerous cost-cutting changes that came under scrutiny because many worried they would delay the timely delivery of election mail.

In a letter to Biden last week, Pascrell said the president should fire the Postal Service's Board of Governors for the mail delays and the Postal Service changes instituted by DeJoy. The new members could then vote to fire DeJoy.

The White House did not respond to a request for comment when asked whether Biden supported the "USPS Fairness Act" or the push to change Postal Service leadership.

Dimondstein said the union is pressing for the president to make nominations for four open governor slots quickly and pointed out that there are no women or Black members of the board. There are also “no people that have any knowledge of the inner workings of the postal service,” he said.

“Whoever the postmaster general is, we need a strong postal Board of Governors in terms of setting the policy and the direction," he said. "And we believe that's at the fingertips of this president now to get done quickly.”