[House Report 111-216]
[From the U.S. Government Publishing Office]
111th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 111-216
======================================================================
UNITED STATES POSTAL SERVICE FINANCIAL RELIEF ACT OF 2009
_______
July 21, 2009.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Towns, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
[To accompany H.R. 22]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, to whom
was referred the bill (H.R. 22) to amend chapter 89 of title 5,
United States Code, to allow the United States Postal Service
to pay its share of contributions for annuitants' health
benefits out of the Postal Service Retiree Health Benefits
Fund, having considered the same, report favorably thereon with
an amendment and recommend that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Legislative History.............................................. 4
Section-by-Section............................................... 4
Explanation of Amendments........................................ 5
Committee Consideration.......................................... 5
Rollcall Votes................................................... 5
Application of Law to the Legislative Branch..................... 5
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 5
Statement of General Performance Goals and Objectives............ 5
Constitutional Authority Statement............................... 5
Federal Advisory Committee Act................................... 6
Unfunded Mandates Statement...................................... 6
Earmark Identification........................................... 6
Budget Authority and Congressional Budget Office Cost Estimate... 6
Changes in Existing Law Made by the Bill, as Reported............ 10
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``United States Postal Service Financial
Relief Act of 2009''.
SEC. 2. GOVERNMENT CONTRIBUTIONS FOR POSTAL ANNUITANTS' HEALTH
BENEFITS.
(a) In General.--Paragraph (2)(A) of section 8906(g) of title 5,
United States Code, is amended to read as follows:
``(2)(A)(i) The Government contributions authorized by this section
for health benefits for an individual who first becomes an annuitant by
reason of retirement from employment with the United States Postal
Service on or after July 1, 1971, or for a survivor of such an
individual or of an individual who died on or after July 1, 1971, while
employed by the Postal Service, shall----
``(I) except as provided in clause (ii), be paid by the
Postal Service through September 30, 2016; and
``(II) after September 30, 2016, be paid first from the
Postal Service Retiree Health Benefits Fund up to the amount
contained in the Fund, with any remaining amount paid by the
Postal Service.
``(ii) The Government contributions payable under this paragraph for
a fiscal year which is within the period beginning with fiscal year
2009 and ending with fiscal year 2011 shall be paid in the manner set
forth in clause (i)(II) (rather than clause (i)(I)).''.
(b) Effective Date; Recovery of Prior Payments; Definitions.----
(1) Effective date.--This section and the amendment made by
this section shall be effective as of October 1, 2008, and
shall apply with respect to Government contributions payable
for pay periods beginning on or after that date.
(2) Recovery of prior payments.--In the case of any direct
contributions made for any pay period beginning on or after the
effective date of this section and ending before the date of
enactment of this Act, the United States Postal Service may
recover the amount of those direct contributions so made
through offsets against any amounts which (but for this
paragraph) would otherwise be payable, on or after such date of
enactment, under section 8909a of title 5, United States Code.
(3) Definition.--For purposes of this subsection the term
``direct contributions'' refers to contributions payable in the
manner described in subclause (I) of section 8906(g)(2)(A)(i)
of title 5, United States Code (as amended by subsection (a)).
SEC. 3. TECHNICAL CORRECTION.
The heading for section 8909a of title 5, United States Code, is
amended by striking ``Benefit'' and inserting ``Benefits''.
Purpose and Summary
H.R. 22, the United States Postal Service Financial Relief
Act of 2009, was introduced by Representative John McHugh on
January 6, 2009. H.R. 22, as ordered reported, would amend
title 5 of the United States Code to permit the United States
Postal Service (Postal Service) to pay the health care premiums
for its current retirees from the Postal Service Retiree Health
Benefits Fund (RHBF) in fiscal years 2009, 2010, and 2011. The
legislation would provide temporary financial relief to the
Postal Service, saving over $2 billion in operating funds each
fiscal year between 2009 and 2011. In short, the bill is
intended to provide the Postal Service with relief from its
current financial crisis.
Background and Need for Legislation
The Postal Accountability and Enhancement Act\1\ (PAEA)
requires the Postal Service to make two separate payments for
postal retiree health benefits. Through September 30, 2016, the
Postal Service must pay its share of insurance premiums for
current annuitants' health benefits.\2\ The Postal Service
estimates these payments at about $2 billion per year
currently, rising eventually to $4.2 billion. The premium
payments are made monthly out of the Postal Service's operating
funds.
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\1\P.L. 109-435.
\2\5 U.S.C. 8906(g)(2)(A).
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In addition, the PAEA established the RHBF and required the
Postal Service to annually deposit funds to pre-fund the health
insurance premiums of future Postal Service retirees.\3\ The
PAEA specifies the payments for the first ten years, ranging
from $5.4 billion to $5.8 billion for fiscal years 2007 through
2016.\4\ After 2016, the Office of Personnel Management is
directed to recalculate the amount of the remaining liability
and to establish a payment schedule to amortize the remaining
liability.\5\ The payment schedule for the first ten years was
established primarily to make the PAEA budget neutral,
responding to the concerns of the Office of Management and
Budget at the time the PAEA was passed, rather than
corresponding to actuarial requirements or financial conditions
at the Postal Service.
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\3\5 U.S.C. 8909a(a).
\4\5 U.S.C. 8909(a)(d)(3)(A).
\5\5 U.S.C 8909a(d)(2)(B).
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Faced with a steep decline in mail volume, rising costs, a
growing delivery network, and the recession, the Postal Service
is presently experiencing an unprecedented deterioration in its
financial condition. For May 2009, the Postal Service's
preliminary, unaudited financial reports showed a loss of
nearly $700 million, largely due to ongoing decreases in mail
volume. This followed a loss of $1.9 billion in the second
quarter of FY 2009.\6\ In May 2009, the Postal Service reported
that it had incurred net losses from operations in 10 of the
previous 11 fiscal quarters and anticipates losses of over $6
billion and a cash shortfall of over $1.5 billion for the
year.\7\ The retiree health benefits payments required by the
PAEA have accelerated this financial crisis.
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\6\US Postal Service. (2009). SEC Form 10-Q for the quarter ended
March 31, 2009. Available online from the Postal Regulatory Commission
at http://www.prc.gov/Docs/63/63038/Final_Quarter_II_FY_09_-_10Q.pdf.
\7\USPS, Postal Service Ends Second Quarter with $1.9 Billion Loss
(May 6, 2009) (online at www.usps.com/communications/newsroom/2009/
pr09_047.htm).
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As amended, H.R. 22 would amend chapter 89 of title 5,
United States Code, to allow the Postal Service's share of
contributions for annuitants' health benefits to come out of
the RHBF for FY 2009 through FY 2011. H.R. 22 would provide
approximately $2 billion in relief to the Postal Service in FY
2009 and over $2 billion in subsequent years. H.R. 22 would not
affect the Postal Service's legal obligation to continue making
payments into the RHBF to pre-fund future retirees' health
premiums. The RHBF contains about $32 billion and will continue
to grow after H.R. 22 is enacted into law.\8\
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\8\National League of Postmasters of the U.S., Refinancing USPS
Retiree Health Benefits, Postmasters Advocate (March 2009).
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The Postmaster General has stated that, given its current
financial situation, the Postal Service is not in a position to
reduce its current cost-cutting efforts even if Congress
provides financial relief by enacting H.R. 22.\9\ In addition,
the Inspector General of the Postal Service testified that even
if the Postal Service meets its aggressive cost-cutting goals
for FY 2009, it would face ``a gap between costs and revenues
of as much as $6 billion,''\10\ further underscoring that the
Postal Service would continue to cut costs despite receiving
relief under H.R. 22.
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\9\Letter of Postmaster General John E. Potter to Congressional
Budget Office Director Douglas Elmendorf (March 25, 2009).
\10\Committee on Oversight and Government Reform, Hearing on
Restoring the Financial Stability of the U.S. Postal Service: What
Needs to be Done? Written testimony of David Williams, Inspector
General of the United States Postal Service, 111th Congress (Mar. 25th,
2009).
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Legislative History
H.R. 22 was introduced on January 6, 2009 by Representative
McHugh and referred to the Committee on Oversight and
Government Reform and the Subcommittee on Federal Workforce,
Postal Service, and the District of Columbia. As introduced,
H.R. 22 would permit the Postal Service to pay its share of its
current retirees' health premiums out of the RHBF for eight
years.
On March 25, 2009, the Subcommittee held a hearing entitled
``Restoring the Financial Stability of the U.S. Postal Service:
What Needs to be Done,'' at which the bill was discussed.
The Subcommittee held a markup of H.R. 22 on June 24, 2009,
and adopted by voice vote an amendment in the nature of a
substitute to H.R. 22, limiting relief to three years. The
Subcommittee then ordered H.R. 22 reported as amended, by voice
vote.
On July 10, 2009 the Committee held a markup of H.R. 22.
The Committee adopted the Subcommittee's amendment in the
nature of a substitute by unanimous consent, and ordered H.R.
22 reported as amended, by voice vote.
Section-by-Section
Sec. 1. Short title
The short title of the bill is the United States Postal
Service Financial Relief Act of 2009.
Sec. 2. Government contributions for postal annuitants' health benefits
Subsection (a) of section 2 would amend paragraph (2)(A) of
section 8906(g) of title 5, United States Code to permit the
Postal Service to pay its share of the health premiums for
current retirees out of the Postal Service Retiree Health
Benefits Trust Fund in FY 2009 through FY 2011.
Subsection (b) would make this authority retroactive to
October 1, 2008, and would allow the Postal Service to recover
premium payments that it has made in FY 2009.
Current law directs the Postal Service to begin making
payments for the health premiums of its current retirees out of
the RHBF in 2016. Section 2 would allow the Postal Service to
make the payments out of the RHBF in FY 2009 through FY 2011.
Furthermore, for monthly premium payments that the Postal
Service has made from its operating funds from October 1, 2008
until passage of H.R. 22, section 2 would permit the Postal
Service to recover the total of such payments from the RHBF.
Sec. 3. Technical correction
Section 3 would make a technical correction to section
8909a of title 5, United States Code, by striking ``Benefit,''
and inserting ``Benefits.''
Explanation of Amendments
An amendment in the nature of a substitute was adopted by
unanimous consent. Rather than permitting health care premium
payments for current postal retirees to be drawn from the RHBF
for eight years, the amendment would authorize the Postal
Service's share of contributions for annuitants' health
benefits to be paid out of the RHBF for three years, FY 2009
through 2011. The shorter period of relief reduces the
projected cost of the bill.
Committee Consideration
On Friday, July 10, 2009, the Committee met in open session
and favorably ordered H.R. 22 to be reported to the House by
voice vote.
Rollcall Votes
No rollcall votes were taken.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to terms and conditions of
employment or access to public services and accommodations.
H.R. 22 is not applicable to the legislative branch in
relation to the terms and conditions of employment or access to
public services and accommodations.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report, including
the need to provide temporary financial relief to the United
States Postal Service.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report, including permitting payments for the health
benefits premiums of current Postal Service retirees to come
out of the RHBF rather than postal operating funds, in order to
strengthen the short term financial position of the United
States Postal Service.
Constitutional Authority Statement
Under clause 3(d)(1) of rule XIII of the Rules of the House
of Representatives, the Committee must include a statement
citing the specific powers granted to Congress to enact the law
proposed by H.R. 22. Article I, Section 8, Clauses 7 and 18 of
the Constitution of the United States grant the Congress the
power to enact this law.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandates Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandates Reform Act, P.L. 104-4) requires a statement on
whether the provisions of the report include unfunded mandates.
In compliance with this requirement, the Committee has received
a letter from the Congressional Budget Office included herein.
Earmark Identification
H.R. 22 does not include any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9(d), 9(e), or 9(f) of rule XXI.
Committee Estimate
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 22. However, clause 3(d)(3)(B) of that rule provides that
this requirement does not apply when the Committee has included
in its report a timely submitted cost estimate of the bill
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act.
Budget Authority and Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for H.R. 22 from the Director of
the Congressional Budget Office:
July 20, 2009.
Hon. Edolphus Towns,
Chairman, Committee on Oversight and Government Reform, House of
Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 22, the United
States Postal Service Financial Relief Act of 2009.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark
Grabowicz.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 22--United States Postal Service Financial Relief Act of 2009
Summary: H.R. 22 would authorize the United States Postal
Service (USPS) to make payments for retirees' health insurance
premiums from the Postal Service Retiree Health Benefits Fund
(PSRHBF) for fiscal years 2009 through 2011. Under current law,
funds in the PSRHBF are not available for spending until fiscal
year 2017.
CBO estimates that enacting the bill would result in on-
budget costs of about $5 billion and off-budget savings of $2.5
billion over the 2009-2019 period. (Cash flows of the Postal
Service are classified as off-budget, while the PSRHBF is an
on-budget account.) Combining those effects, CBO estimates that
the net cost to the unified budget of enacting H.R. 22 would be
about $2.5 billion over the 2010-2019 period. All of those
effects reflect changes in direct spending. H.R. 22 would not
affect revenues.
H.R. 22 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would not affect the budgets of state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 22 is shown in the following table.
The costs of this legislation fall within budget function 370
(commerce and housing credit).
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By fiscal year, in millions of dollars--
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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009-2014 2009-2019
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CHANGES IN DIRECT SPENDING
On-budget Effects (PSRHBF):
Estimated Budget Authority................................... 2,000 2,200 2,500 0 0 0 0 0 -550 -550 -550 6,700 5,050
Estimated Outlays............................................ 2,000 2,200 2,500 0 0 0 0 0 -550 -550 -550 6,700 5,050
Off-budget Effects (Postal Service Fund):
Estimated Budget Authority................................... -1,800 -1,100 -1,250 0 0 0 0 0 550 550 550 -4,150 -2,500
Estimated Outlays............................................ -1,800 -1,100 -1,250 0 0 0 0 0 550 550 550 -4,150 -2,500
Total Unified Budget Effects:
Estimated Budget Authority................................... 200 1,100 1,250 0 0 0 0 0 0 0 0 2,550 2,550
Estimated Outlays............................................ 200 1,100 1,250 0 0 0 0 0 0 0 0 2,550 2,550
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Note: PSRHBF = Postal Service Retiree Health Benefit Fund.
Budgetary effects in 2017 through 2019 reflect Postal Service amortization payments to the PSRHBF.
Basis of estimate: CBO assumes that H.R. 22 will be enacted
before the end of fiscal year 2009. The bill would authorize
the Postal Service, over the 2009-2011 period, to shift
payments for retirees' health insurance premiums from the off-
budget Postal Service Fund to the PSRHBF, an on-budget account
established by the Postal Accountability and Enhancement Act
(Public Law 109-435) to prefund retirees' health benefits.
Under current law, funds in the PSRHBF are not available to the
USPS for retirees' health costs until fiscal year 2017.
CBO estimates that the government's payments for retirees'
health insurance premiums will be about $2.0 billion in 2009,
$2.2 billion in 2010, and $2.5 billion in 2011. Thus, the
legislation would increase spending from the on-budget PSRHBF
by $6.7 billion over the 2009-2011 period.
CBO expects that savings to the Postal Service Fund would
be less than $6.7 billion over the same period. We expect that
lowering the health care expenses of the Postal Service Fund by
$2 billion or more annually would cause the agency to modify
its efforts to reduce other spending near the end of fiscal
year 2009 and in future years. Faced with an imbalance of
receipts from postal customers and operational costs, the
Postal Service has made significant efforts to reduce spending
in recent years and is expected to continue to do so.
Early in 2009, the Postal Service announced plans to cut
spending by $5.9 billion over the 2009-2010 period. Just a few
months later in response to worsening financial conditions, the
agency accelerated the cost-cutting program and aimed to cut
$5.9 billion in 2009 alone. CBO expects that eliminating a $2
billion expense would lead the agency to alter its cost-
reduction program by cutting spending less aggressively than it
would without the legislation. Consequently, enacting this
legislation would increase net postal outlays relative to
current law.
CBO estimates that the increase in net USPS outlays in 2009
would be relatively small because most of the fiscal year will
have elapsed by the time the legislation is enacted and because
the agency's financial condition is precarious. We expect that
changes to the USPS's cost-cutting plan would become noticeably
larger in 2010 and 2011. We estimate that the increase in net
USPS outlays in 2010 and 2011 would be about half of the
government's payments for retirees' health insurance premiums
for those years--about $1 billion in each year. (In fiscal year
2008, on a cash basis, the Postal Service reported expenses of
$78.6 billion.) On balance, CBO estimates that enacting H.R. 22
would increase spending (for the unified budget) by $200
million in 2009 and by about $2.5 billion over the 2009-2011
period.
H.R. 22 would have budgetary effects after 2016, but CBO
estimates that those changes would have no net impact on
unified budget totals. Public Law 109-435 requires the Postal
Service to make annual amortization payments for retirees'
health benefits into the PSRHBF beginning in 2017. Because the
bill would reduce payments into the PSRHBF from 2009 to 2011,
interest earnings of that fund would be lower. Thus, the annual
amortization payments would be higher than expected under
current law. Based on information from the Office of Personnel
Management, CBO estimates that the increase in payments would
be $550 million in each year, beginning in 2017. However,
because those payments are intragovernmental transfers,
increased spending from the Postal Service Fund would be offset
by increased receipts into the PSRHBF, so there would be no net
effect on the unified budget.
Intergovernmental and private-sector mandates: H.R. 22
contains no intergovernmental or private-sector mandates as
defined in UMRA and would not affect the budgets of state,
local, or tribal governments.
Estimate prepared by: Federal costs: Mark Grabowicz; Impact
on state, local, and tribal governments: Elizabeth Cove
Delisle; Impact on the private sector: Paige Piper/Bach.
Estimate approved by: Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 5, UNITED STATES CODE
* * * * * * *
PART III--EMPLOYEES
* * * * * * *
SUBPART G--INSURANCE AND ANNUITIES
* * * * * * *
CHAPTER 89--HEALTH INSURANCE
* * * * * * *
Sec. 8906. Contributions
(a) * * *
* * * * * * *
(g)(1) * * *
[(2)(A) The Government contributions authorized by this
section for health benefits for an individual who first becomes
an annuitant by reason of retirement from employment with the
United States Postal Service on or after July 1, 1971, or for a
survivor of such an individual or of an individual who died on
or after July 1, 1971, while employed by the United States
Postal Service, shall through September 30, 2016, be paid by
the United States Postal Service, and thereafter shall be paid
first from the Postal Service Retiree Health Benefits Fund up
to the amount contained in the Fund, with any remaining amount
paid by the United States Postal Service.]
(2)(A)(i) The Government contributions authorized by this
section for health benefits for an individual who first becomes
an annuitant by reason of retirement from employment with the
United States Postal Service on or after July 1, 1971, or for a
survivor of such an individual or of an individual who died on
or after July 1, 1971, while employed by the Postal Service,
shall--
(I) except as provided in clause (ii), be paid by the
Postal Service through September 30, 2016; and
(II) after September 30, 2016, be paid first from the
Postal Service Retiree Health Benefits Fund up to the
amount contained in the Fund, with any remaining amount
paid by the Postal Service.
(ii) The Government contributions payable under this
paragraph for a fiscal year which is within the period
beginning with fiscal year 2009 and ending with fiscal year
2011 shall be paid in the manner set forth in clause (i)(II)
(rather than clause (i)(I)).
* * * * * * *
Sec. 8909a. Postal Service Retiree Health [Benefit] Benefits Fund
(a) * * *
* * * * * * *