Senate Passes Bipartisan Postal Service Overhaul

The Postal Service has been reporting losses for years, stemming in large part from a drop in first-class mail and the requirement to prefund its retiree health benefits. But previous attempts to restructure the delivery service got bogged down, in part because so many political interests had competing visions for the Postal Service.

The bill would undo a requirement in a 2006 law that the Postal Service prefund its retiree health benefits, which the agency projects will save $27 billion over a decade. At the time, Democrats saw the provision as helping ensure promised retirement benefits, while Republicans viewed it as a way to force the service provider to act more like a private enterprise.

Then-President George W. Bush had threatened to veto the entire postal law unless the prefunding provision were included, according to former Rep. Tom Davis (R., Va.), who helped write the bill.

By 2018, the Government Accountability Office reported that the Postal Service hadn’t made any contributions to the retirement fund since 2010.

The bill would also require postal workers to enroll in Medicare when they reach 65 years old—something that Congress said about a quarter of the agency’s workers don’t do. That change would save the Postal Service about $22.6 billion over a 10-year period, the agency estimates.

It also would permanently mandate six-day-a-week delivery, a policy that Congress has put into annual appropriations bills to protect against a conservative drive to force service cuts.

The legislation “represents consensus on essential reforms for the United States Postal Service, overdue for over a decade,” said Homeland Security and Governmental Affairs Committee Chairman Gary Peters (D., Mich.), who led the effort to pass the bill through the Senate.

“The alternative was really bad,” said Sen. Rob Portman (R., Ohio), the top Republican on the panel. “In a few years, you would have seen the post office go belly up,” he predicted, risking another government bailout after the service tapped $10 billion from the Treasury in 2020.

Mr. Portman said that the bill would provide enough savings to cover what he estimated was a $160 billion shortfall, and that the expectation was a Postal Service overhaul plan would make up the rest.

Critics of the bill said that it would simply shift costs to Medicare while not significantly improving the post office’s service or cost structure.

While Republican supporters of the bill said that Postal Service employees had paid into Medicare and should be covered, Sen. Rick Scott (R., Fla.) said that “Medicare costs are already skyrocketing. Passing this bill would further jeopardize Medicare.”

Under the legislation, the Postal Service would be able to strike agreements with local governments to provide services like offering fishing, hunting and drivers’ licenses. It excludes measures long favored by progressives, like requiring the Postal Service to offer banking services or to shift to all-electric delivery vehicles from gas-powered vehicles. And it mandates special mailing rates for local newspapers in order to promote local news.

Its supporters anticipate that the bill will also allow the Postal Service to invest in package-sorting equipment to speed mail delivery and to restructure it for a world in which first-class mail will decline further while package delivery rises.

The bill requires the Postal Service to deliver packages as well as mail across an integrated network—a mandate that big shippers like FedEx Corp. warn will put financial pressure on the Postal Service and trigger a new round of government investment.

The overhaul legislation, which the Postal Service estimates would save it tens of billions of dollars over a decade, was a key component of the service’s plan to attempt to fix the agency, which was laid out last March. Postal Service leaders want to pivot toward the package business, raise prices and stretch out delivery times for some first-class mail, among other changes.

The Postal Service had long asked Congress to integrate its retiree health plans with Medicare and rescind the requirement to prefund its employee retirement benefits decades out into the future. The moves are a key part of a 10-year plan by Postmaster General Louis DeJoy to overhaul the agency’s operations and avoid more than $100 billion in projected losses.

Mr. DeJoy’s predecessor had sought similar legislative changes. Despite some bipartisan support, none advanced in Congress. The retiree changes would account for about $58 billion in projected savings, the agency has estimated.

A pandemic boom in package shipments has slowed, the agency reported this week. The Postal Service posted an adjusted loss of $195 million for the Dec. 31 quarter, versus a profit of $727 million a year earlier, when excluding certain noncontrollable items.