A Grand Alliance Leads Push for Prefunding Repeal

September 11, 2019

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(This article first appeared in the September/October 2019 issue of the American Postal Worker magazine) 

Before members of Congress prepared to head back to their districts for the August recess period, postal workers and allies in A Grand Alliance made a huge push to win support for prefunding repeal legislation, the USPS Fairness Act (H.R. 2382). This legislation would help stabilize the Postal Service’s finances and eliminate one of the main tactics privatizers employ in promoting postal privatization.

On July 15, A Grand Alliance to Save our Public Postal Service hosted a briefing for congressional staff on the prefunding mandate’s origins, the effects of USPS service cuts, and the potential effects further cuts – or even privatization – would have on communities across the country.

The briefing was intended to educate congressional staffers and it served as the opening kickoff for a flurry of actions organizing support for H.R. 2382 (see article on page 10 for more information about APWU’s call-in day).

The 2006 prefunding mandate in the Postal Accountability and Enhancement Act required the Postal Service to create, in just a 10-year period, a more than $70 billion fund to pay for the cost of its future retiree health care benefits – 75 years into the future. This is a burden no other agency or private corporation in the country faces. A Grand Alliance’s briefing featured three panelists, each of whom addressed different aspects of the manufactured crisis facing the Postal Service. Scott Klinger, an associate fellow at the Institute for Policy Studies (IPS), presented new research he and colleagues at IPS recently published which underscores just how unusual the prefunding mandate is. The research shows how the mandate is the cause of 100 percent of the Postal Service’s losses since 2013. Mark Dimondstein, President of the APWU, pointed the finger at the 2006 prefunding mandate as the main justification for service cuts and subsequent calls for postal privatization. Melanie Campbell, the President of the National Coalition on Black Civic Participation, highlighted the important social role the Postal Service plays – both as an employer and a vital service provider – for communities across the country.

New Report Identifies Prefunding Mandate as Cause of USPS’s Financial Problems

Klinger led off the panelists with his presentation of IPS’s new research, How Congress Manufactured a Postal Crisis – And How to Fix It. The report identifies the 2006 prefunding mandate as the single, most important source of the financial crisis facing the Postal Service. With the drain on resources, the study notes, the Postal Service has been forced to forego necessary investments in new technology and innovative services, its vehicle fleet, and even routine maintenance of vehicles and facilities.

Perhaps the most interesting parts in the IPS research, however, are the indications that the underlying financial health of the Postal Service is quite different than casual observers might otherwise understand. The report compares the state of the Postal Service’s postretirement benefit funds – including pension and retiree health care benefit funds – to comparable private sector companies and to other agencies in government. The Postal Service’s two pension funds – CSRS and FERS – are both more than 86 percent funded. These funding levels far outpace other federal agencies, and if it were a private sector company, they would place the Postal Service well into the “green zone” under private sector accounting principles.

All told, the Postal Service has amassed more than $280 billion in its two retirement funds and $47.5 billion in the retiree health care benefit fund. The two funds would almost certainly be larger as well, the IPS report noted, if the Postal Service weren’t limited in the ways it is allowed to invest existing funds. The Postal Service is unique among both its private sector peers and postal systems around the world in its requirement to invest in only low-yielding Treasury bonds instead of a broad range of securities and investments.

The IPS research also looked at the retiree health care benefit prefunding practices of the largest private sector corporations in the country. Again, the Postal Service comes out well ahead with its current funding levels of 38 percent. “A majority of firms,” IPS noted, “pay their retiree health care costs on a “pay-as-you-go” basis, as the USPS also did prior to the 2006 health care mandate.” The conclusions of the comparisons were striking: “Concerns that the Postal Service are on ‘an unsustainable path’ are unjustified when one compares postal finances to those in the private sector.”

Indeed, as Klinger noted, “Even the [White House] Task Force report states clearly…that without the mandate, the Postal Service would have made small profits in the last six years.”

In discussing the origins of the mandate, Klinger, who is a chartered financial analyst, noted that the prefunding mandate isn’t called for by any accounting principle. “The mandate had no basis in reality and no basis in accounting practice,” Klinger said. “It’s a lot like if you go to a bank and apply for a credit card, and them telling you, ‘okay, we’ll give you a credit card, but first you have to open up an account and put $500,000 into it because that’s what we figure you’re going to spend over your lifetime.’” Klinger and the IPS report concluded that the USPS Fairness Act would be the most direct way to right the unsustainable situation caused by Congress in 2006.

Prefunding Mandate Must Be Repealed

President Dimondstein pointed to the IPS conclusions as more evidence of what the APWU has long argued. “Our union has long held that there is a very important role for the Postal Service in the economic, social and civil areas of 21st Century life. There is no greater contributor to today’s financial challenges for the USPS and the threat to its future than the onerous and unfair mandate.”

“The unfair prefunding mandate must be fixed and corrected,” Dimondstein continued. “Congress created the crisis…[and] Congress has an obligation to fix it. The most direct route is to end the prefunding mandate.”

The Postal Service is for the People

“We need to get the word out that a robbery is in process. The robbery that I speak of is the attempt, by this administration, to steal the people’s Postal Service,” said Campbell in her remarks at the briefing. “The U.S. Postal Service belongs to the American people, and it has served all communities – rural, small towns, urban, and suburban – since 1775.”

“The issue of saving the United States Postal Service from being privatized is a top priority for our organization,” Campbell said. “The Postal Service has had a unique contribution to black and brown communities across this nation. In 2018, black workers made up 28.6 percent of the USPS workforce, more than double their share of the U.S. population. These are good, union jobs.”

“The United States Postal Service is an American treasure that belongs to all of us and should remain that way well into the future,” Campbell concluded in urging Congress to pass the USPS Fairness Act.

In addition to their opening remarks, the panelists took a number of questions from the congressional staff in attendance. The questions indicated that congressional offices were keen to examine additional roles for the Postal Service – like postal banking and leveraging the Postal Service’s physical infrastructure for clean energy initiatives.

A Grand Alliance to Save Our Public Postal Service is a broad coalition of national, state and local organizations including the NAACP, Vote Vets, Jobs with Justice, National Council of Churches and Rainbow PUSH. These groups have come together to take a stand against the unprecedented assaults on the Postal Service including efforts to dismantle and privatize it. To join A Grand Alliance, visit www.AGrandAlliance.org.


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