A Stopgap For Congress’s Reluctance To Tackle Postal Reform

The U.S. Congress is weary of the heavy lift of postal reform even though a smooth functioning Postal Service is vital to American commerce. Fixing the debt-ridden and chronically troubled government agency with unfunded liabilities of more than $140 billion requires an unpleasant mix of higher prices and reduced service.

Nearly nine months after a Presidential task force made sweeping and comprehensive reform recommendations, neither chamber has given birth to a reform bill, or begun the subsequent arduous process to hammer out a bipartisan measure.

During April 30 testimony to the House Committee on Oversight and Reform, Postmaster General Megan Brennan said that since 2011 nine major postal reform bills have been introduced, with none passing.

There are several high-impact, low-cost items that are relatively easy politically that Congress should enact soon. None involves outlays of taxpayer funds. Rather, the Postal Service, would pay these amounts from its revenues, as directed by Congress.

Substantially Increase Board of Governors Compensation

The Postal Service’s Board of Governors, the equivalent of a corporate Board of Directors, can do a great deal to help energize and fix the Postal Service. With Senate confirmation on August 1 of three new Governors, the Board now has five members, a quorum, for the first time since 2014. Four vacancies remain.

The Board has significant power, including directing and controlling expenditures; approving officer compensation and addressing service standards and capital expenditures. All the Governors are well respected leaders with impressive business and public policy experience. And they are vastly underpaid.

To retain and attract quality Governors, they should be paid much more.

Currently, the most a Governor can make is $42,600 annually. This is a small fraction of what the Governors would receive as directors at similarly sized corporations. A 2018 board compensation study by Spencer & Stuart found the average total compensation for S&P 500 non-employee directors was $295,000.

It has been more than 10 years since Postal Service Governors were given a raise. And, with the absence of directors for so many years, there is plenty of catch-up work to do. Instituting base compensation of $125,000 is quite reasonable.

One of the many areas where Governors can bring immediate, substantial value – and pay for their own compensation several times over — is by addressing the Postal Service’s costing methodology. A 2014 study by the Postal Service’s Office of the Inspector General found that “the Postal Service would benefit significantly from a greenfield, modern, bottom-up costing and revenue analysis system.”

In plain English, this means knowing what the costs are for different products. And with approximately 40 percent of Postal Service expenses not assigned to any product, there is an urgent need for this work which will, among other things, determine whether package shipments are profitable. The Presidential task force also trumpeted the need for better cost allocation.

Strengthen Funding for the Postal Regulatory Commission

As its name implies, the mission of the Postal Regulatory Commission (PRC) is to hold the Postal Service accountable to its customers, the American people. The PRC reviews the Postal Service’s proposed rates to see if they are justified and makes sure the Postal Service complies with the letter and spirit of U.S. laws.

With a current budget of $15.6 million, and a staff of approximately 75, the PRC’s budget is a tiny fraction of the Postal Service’s $70 billion annual revenue. Given this and that its budget has been essentially flat for the past decade, the PRC should have substantially more resources.

Strengthen Funding for the Postal Service’s Office of Inspector General

Also scrutinizing the Postal Service is its Office of Inspector General (OIG), author of the preceding cost report. The OIG also investigates fraud and abuse. With a current $245 million annual budget, the office returns $9 for every $1 it gets, such as by reducing healthcare fraud. Yet, the OIG does not get to keep these recovered proceeds.

The Postal Service can and should have a great future. Whether or not Congress does the hard work to fix it soon, it should grind away and enact the above measures as part of the budget process in the coming weeks.

About the Author: Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.