Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Ms. COLLINS. Mr. President, I rise today to introduce The U.S. Postal Service Improvements Act of 2011. This legislation would help the U.S. Postal Service regain its financial footing as it adapts to the era of increasingly digital communications.

The storied history of the Postal Service pre-dates our Constitution. In 1775, the Second Continental Congress appointed Benjamin Franklin as the first Postmaster General and directed the creation of ``a line of posts ..... from Falmouth in New England to Savannah in Georgia.'' The Constitution also gives Congress the power to establish post offices and post roads.

Today, the Postal Service is the linchpin of a $1 trillion mailing industry that employs approximately 7.5 million Americans in fields as diverse as direct mail, printing, catalog companies, paper manufacturing, and financial services.

Postal Service employees deliver mail six days a week to hundreds of millions of households and businesses. From our largest cities to our smallest towns, from the Hawaiian Islands to Alaskan reservations, the Postal Service is a vital part of our national communications network and an icon of American culture.

But the financial state of the Postal Service is abysmal. The numbers are grim: the Postal Service lost $8.5 billion in fiscal year 2010 and recently announced that it posted a net loss of $329 million in the first quarter of fiscal year 2011 alone. The ``Great Recession,'' high operating costs, and the continuing diversion of mail to electronic alternatives have undermined the Postal Service's ability to remain solvent.

Faced with this much red ink, the Postal Service must reinvent itself. It must increase revenues by increasing its value to its customers and by becoming more cost effective.

Unfortunately, many of the solutions the Postal Service has proposed would only aggravate its problems. Filing for enormous rate increases, pursuing significant service reductions--including elimination of Saturday mail delivery--and seeking relief from funding its huge liabilities are not viable long-term solutions to the challenges confronting the Postal Service. These changes will drive more customers to less expensive, digital alternatives. That downturn in customers will further erode mail volume and lead to a death spiral for the Postal Service.

The Postal Service must chart a new course in this digital age. It must adopt a more customer-focused culture. It must see the changing communications landscape as an opportunity.

The Postal Accountability and Enhancement Act of 2006, which I authored with Senator CARPER, provided the foundation for these long-term changes, but the Postal Service has been slow to take advantage of some of the flexibilities afforded by that law. And, to be fair, the Postal Service has encountered problems not of its making, such as a severe recession.

The legislation that I introduce today would help the Postal Service achieve financial stability and light the way to future cost savings without undermining customer service.

The legislation would help remedy an enormous overpayment by the Postal Service into retirement funds used by both Federal and postal employees alike. Based on an independent actuarial analysis, the Postal Regulatory Commission estimates the Postal Service has overpaid in excess of $50 billion into the Civil Service Retirement System, CSRS, and nearly $3 billion into the Federal Employees Retirement System pension fund. Another independent actuarial firm, commissioned by the Postal Service Inspector General, estimates that the overpayment into the CSRS pension fund is even greater, perhaps topping $75 billion. It is simply unfair--both to the Postal Service and its customers--not to refund these overpayments.

To address these inequities, the bill would allow the Postal Service access to the amounts that it has overpaid into these pension funds. It is essential that the Postal Service be permitted to use these funds to address other financial obligations, such as its payments for future retiree health benefits and unfunded workers' compensation liabilities and for repaying its existing debt.

I have pressed the Office of Personnel Management, OPM, to change its calculation method for Postal Service payments into the CSRS fund consistent with the 2006 Postal Reform law. OPM officials, however, have stubbornly refused to change this methodology or even to admit that the 2006 postal law permits them to do so. This has created a bureaucratic standoff that is unfair to the Postal Service. The OPM holds the life preserver--it could help rescue the Postal Service, but it simply refuses to throw it.

This legislation directs the OPM to exercise its existing authority under the 2006 postal reform law and to revise its methodology for calculating the Postal Service's obligations to the CSRS pension fund. Once OPM exercises this authority, my legislation would allow the Postal Service to use any resulting overpayments to cover its annual payments into the Retiree Health Benefits Fund, rather than having to wait until after September 30, 2015, to access the CSRS overpayment.

Additionally, the legislation would allow the Postal Service to access the nearly $3 billion it has overpaid into the Federal Employees Retirement System, FERS, pension fund. The legislation would grant OPM this authority by adopting language, similar to Section 802(c) of the 2006 postal reform law, that allows OPM to recalculate the methodology governing Postal Service payments into the FERS pension fund to determine a more accurate contribution.

As with the CSRS overpayment, the Postal Service would be permitted to use the FERS overpayment to meet its statutory obligations to the Retiree Health Benefits Fund. These fund transfers would greatly improve the Postal Service's financial condition.

While I was pleased to see that the proposed budget the President released yesterday addresses the FERS overpayment, I was disappointed that it did not direct OPM to update its methodology to allow the Postal Service to access the significant CSRS overpayment. Moreover, I am concerned that the 30-year repayment period proposed by the President to refund any FERS overpayments is too long given the immediate financial needs of the Postal Service.

If the CSRS and FERS overpayment amounts are sufficient to fully fund the Postal Service's obligations to the Retiree Health Benefits Fund, this legislation would allow the Postal Service to pay its workers' compensation liabilities, which top $1 billion annually. The Postal Service may also choose to use these funds to pay down its existing debt, which currently is $12 billion.

Second, the legislation would improve the Postal Service's contracting practices and help prevent the kind of ethical violations recently uncovered by the Postal Service Inspector General.

Several months ago, I asked the Postal Service Inspector General to review the Postal Service's contracting policies. The IG found stunning evidence of costly contract mismanagement, ethical lapses, and financial waste.

In its review of the Postal Service's contracting policies, the IG discovered no-bid contracts and examples of apparent cronyism. The Postal Service's contract management did not protect against waste, fraud, and abuse. Indeed, it left the door wide open.

In fact, the Postal Service could not even identify how many contracts were awarded without competition. Of the no-bid contracts the IG reviewed, 35 percent lacked justification.

In one of the more egregious examples of waste and abuse, the IG discovered that more than 2,700 contracts had been awarded to former employees since 1991. At least 17 of those contracts were no-bid contracts given to career executives within one year of their separation from the Postal Service.

Some of these former executives were brought back at nearly twice their former pay to advise newly hired executives--an outrageous practice that the IG said raised serious ethical questions, hurt employee morale, and tarnished the Postal Service's public image. In one example, an executive received a $260,000 no-bid contract in July 2009, just two months after retiring. The purpose? To train his successor.

My legislation would help remedy many of the contracting issues the IG identified. Specifically, the bill would direct the Postmaster General to establish a Competition Advocate, responsible for reviewing and approving justifications for noncompetitive purchases and for tracking the level of competition.

Earlier this month, the Postmaster General recognized this as an essential position by naming a Competition Advocate. My bill would help clarify and codify the Competition Advocate's role to ensure that the position continues. Under my legislation, the Competition Advocate would also be required to submit an annual report on Postal Service contracting to the Postmaster General, the Board of Governors, the Postal Regulatory Commission, and the Congress.

To improve transparency and accountability, the bill also would require the Postal Service to publish justifications of noncompetitive contracts greater than $250,000 on its website. This transparency would improve the Postal Service's contracting practices and promote competition.

To resolve the ethical issues documented by the IG, the bill would limit procurement officials from contracting with personal or business associates for private gain. In a June 2010 report, the IG identified several contracts that a former top executive awarded non-competitively to former business associates, totaling nearly $6 million. These contracts included at least two business associates he hired to manage his personal finances and outside business interests. These sorts of inappropriate, unethical contracts are unacceptable, and this legislation would help prevent similar conflicts of interest in the future. In addition, the bill would require the Postal Service's ethics official to review any ethics concerns that the contracting office identifies prior to awarding a contract.

Third, the legislation includes several provisions that would enhance efficiency and reduce costs. While the Postal Service has made efforts to reduce costs over the past several years, more must be done.

One such area is in the consolidation of area and district offices. The IG found that the Postal Service's regional structure--which at the time of the report consisted of eight area offices and 74 district offices and cost approximately $1.5 billion to maintain in fiscal year 2009--has significant room for consolidation. The Postal Service recently announced the closure of one area office, but it needs to conduct a more comprehensive review. My bill would require the Postal Service to create a strategic plan to guide consolidation efforts--a road map for future savings.

The bill also would require the Postal Service to develop a plan to increase its presence in retail facilities, or co-locate, to better serve customers. Before co-location decisions could be made, however, the bill would direct the Postal Service to weigh the impact of any decision on small communities and rural areas. Moreover, the Postal Service would be required to solicit community input before making decisions about co-location and to ensure that co-location does not diminish the quality of service.

Fourth, the bill would require the arbitrator to consider the Postal Service's financial condition when rendering decisions about collective bargaining agreements. This logical provision would allow critical financial information to be weighed as a factor in contract negotiations.

Fifth, the bill would require the Postal Service to provide notice of any significant proposed changes to mailing rules, solicit and respond to comments about the proposed changes, and analyze their potential financial impacts. Mandating that the Postal Service adhere to these notice-and-comment requirements would help ensure that the Postal Service has fully considered the effect that significant changes might have on customers and on the Postal Service's bottom-line.

Sixth, the bill would reduce workforce-related costs government-wide by converting retirement eligible postal and Federal employees on workers' compensation to retirement when they reach age 65, 5 years beyond the average retirement age for postal and Federal employees. This is a commonsense change that would significantly reduce expenses that both the Postal Service and the Federal Government cannot afford.

From July 1, 2009, to June 30, 2010, the Department of Labor paid approximately $2.78 billion to employees on workers' compensation. These workers' compensation benefits serve as a crucial safety net for Federal and postal employees who are injured on the job so they can recuperate and return to work.

But, the Department of Labor indicates that postal and Federal employees across the government are receiving workers' compensation benefits into their 80s, 90s, and even 100s. Because of its benefits structure, the workers' compensation program has morphed into a higher-paying alternative to Federal and postal retirement.

The Postal Service stands out as an unfortunate example of how Federal workers' comp is misused as a retirement system. From July 1, 2009, to June 30, 2010, postal employees accounted for nearly half of all workers' comp benefit payments--about $1.1 billion for 15,470 recipients. Of that number 2,051 were aged 70 or older; 927 were 80 or older; and 132 were 90 or older. Amazingly, three of these postal employees were 98 years old.

I must ask the obvious question: Is there any likelihood that these recipients will ever return to work? No.

Then why aren't they transitioning to the retirement system when they reach retirement age?

This bill reforms the law by converting postal and Federal employees on workers' compensation to the retirement system when they reach age 65. This is a commonsense change that would save millions of dollars that the Postal Service, the Federal Government, and American taxpayers cannot afford to spend.

The Postal Service is at a crossroads; it must choose the correct path. It must take steps toward a bright future. It must reject the path of severe service reductions and huge rate hikes, which will only alienate customers.

I have already received letters of support for my bill from various organizations, including the Alliance of Nonprofit Mailers, Greeting Card Association, Magazine Publishers Association, American Catalog Mailers Association, National Newspaper Association, PostCom, National Postal Policy Council, Coalition for a 21st Century Postal Service, and the National League of Postmasters. I expect to receive more as postal stakeholders learn more about how my bill would help the Postal Service transform its operations.

The Postal Service must re-invent itself. It must embrace changes to revitalize its business model, enabling it to attract and keep customers. The U.S. Postal Service Improvements Act of 2011 will help spark new life into this institution, helping it evolve and maintain its vital role in American society.

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