The U.S. Postal Service wants Congress to help it make significant cuts to employee benefits as part of a plan to balance the agency’s books, according to a draft business plan HuffPost obtained.
The proposal would save an estimated $18 billion on employee compensation over a decade by shaving paid leave, raising workers’ share of pension contributions, and shifting new employees into less secure 401(k)-style retirement plans.
The change to pension contributions would amount to a cut in take-home pay for hundreds of thousands of workers, while saving the agency nearly $7 billion. And while excluding new employees from a pension plan is common practice for private corporations these days, it would mark a significant shift for a federal-sector job long seen as a steppingstone to the middle class.
The change in employee leave policy would combine vacation with sick days, likely resulting in fewer overall days off for workers. That element is estimated to save the agency more than $5 billion.
The proposals obtained by HuffPost were marked as preliminary and subject to change. The postmaster general, Megan Brennan, is expected to present a business plan to the House Oversight Committee this summer.
The Postal Service said in a statement that its board of governors was developing a 10-year plan to put the agency “on a sustainable path forward.”
“Our plan is currently being finalized and reviewed through third-party analysis, and may change as part of this process,” the agency said. “In the coming months, the Postal Service will engage with stakeholders to build support for the plan, which essentially focuses on the key public policy questions of what universal services the organization should provide, and how to pay for those services.”
In addition to the benefit cuts, the agency also proposes requiring retired employees to enroll in Medicare. The move, which is dubbed “Medicare integration” and has previously been included in legislation that didn’t pass, would save an estimated $49 billion over 10 years, according to the document.
The agency is also hoping Congress will allow it to make “frequency delivery changes” ― an apparent reference to dropping to five-day delivery, a controversial idea Brennan floated at a congressional hearing this spring. The major postal unions, as well as many members of Congress on both sides of the aisle, have been vocal opponents of delivery cuts.
The document shows the Postal Service wants to expand its “non-career workforce” ― that is, temporary workers who are not eligible for the same pay and benefits as permanent employees. The Postal Service has already added 37,000 non-career employees since 2007, while shedding nearly 200,000 career employees through attrition, according to the document. The agency currently has around 500,000 career employees, well below its pre-recession numbers.
Jim Sauber, chief of staff at the National Association of Letter Carriers union, called the proposals “grossly unfair,” saying the agency should be “thinking strategically” about areas to grow its business, rather than trying to make cuts. His union represents 270,000 active and retired workers.
“Attacking the employees and reducing services is not a strategy for long-term success,” Sauber said. “It’s a strategy for failure.”
A lot of the ideas in the draft plan require the approval of Congress, including the changes to retirement benefits. Many Democrats, in particular, would object to the proposed compensation cuts.
While much of the proposal is unlikely to go anywhere politically, it shows the thinking of the agency’s leadership as it faces pressure to reverse years of operation losses. The Postal Service is an independent government agency that tries to run like a business ― its operations are entirely funded by the sale of postage and other products ― but its ability to raise prices or change services is limited by law.
Many different postal reform plans have been floated in recent years, but Congress hasn’t followed through on any of them ― even though lawmakers are largely responsible for the agency’s red ink. A 2006 law forced the agency to set aside billions annually in advance funding for its retirees’ health benefits, a requirement unique to the Postal Service. Private sector companies generally fund retiree health care on a pay-as-you-go basis.
Democrats and union representatives have long said the pre-funding policy is a deliberate effort to sabotage the Postal Service, arguing the red ink would inevitably become a pretext for worker benefit cuts.
The Postal Service is legally required to serve the entire U.S. population and is generally forbidden from significantly raising prices on regular mail, which brings in most of the agency’s revenue. Although package delivery has grown, people are sending less and less mail, while population growth forces the agency to serve more and more locations.
By far, the biggest savings in the draft plan come from Medicare integration, since the prefunding requirement is driving the agency’s financial woes. Brennan, who has served in her role since 2015, noted in her testimony earlier this year that the majority of the agency’s net losses over the past 12 years stem from that requirement.
Unions have been clamoring for Congress to remove the prefunding requirement and give the agency more leeway with postage rates before undertaking cuts to delivery or compensation. Such moves, they say, would only deteriorate the quality of the agency and its jobs, making it less viable over the long haul.
In 2017, the House Oversight Committee, which oversees the Postal Service, approved a bipartisan bill that included Medicare integration and would have lifted caps on postage prices. That bill never got a vote in the Republican-controlled House of Representatives.
An oversight committee aide called the proposed cuts “draconian” and said committee chair Rep. Elijah Cummings (D-Md.) would work with both Republicans and Democrats on legislation “similar to the bill that was unanimously supported” by committee members in the previous Congress.
The underlying politics may have shifted since then. Last year, the Trump administration concluded its own study of the Postal Service, recommending leeway for postage prices, cutting pay and restricting collective bargaining, but not enrolling postal retirees in Medicare.
At a hearing in April, Rep. Jim Jordan (R-Ohio), the panel’s top Republican, suggested Congress should privatize letter delivery as some European countries have done. Other committee members demanded that Brennan hurry up and finalize a business plan that would address the agency’s funding problems.
“I need a plan,” said Rep. Mark Meadows (R-N.C.), who previously co-sponsored the committee’s postal legislation. “Even my Democrat colleagues today understand we need a plan. And at what point are we going to get it?”
The cuts outlined in the document are more severe than a previous business plan that included more modest benefit changes and no cuts to paid leave.
Brennan said at the hearing that if the 2017 bill had been enacted, the agency would have already earned another $1 billion in postage revenue and saved as much as $6 billion on retirement health costs. The longer the Postal Service waited, she said, the worse the cuts would be.
“The losses from these missed opportunities can never be recovered,” she said.