Order Code RL31684
Report for Congress
Received through the CRS Web
Funding Postal Service Obligations to the
Civil Service Retirement System
January 2, 2003
Patrick Purcell
Specialist in Social Legislation
Domestic Social Policy Division
Nye Stevens
Specialist in American National Government
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

Funding Postal Service Obligations to the Civil Service
Retirement System
Summary
On November 1, 2002, the Office of Personnel Management (OPM) notified the
U.S. Postal Service (USPS) that a review of USPS payments to the civil service
retirement fund for pension obligations to employees on board before 1984 revealed
a much more positive picture than previously believed. Because past contributions
have been earning interest at a higher rate than presumed in the statutory funding
formula, the deferred liability for pension obligations is only $5 billion instead of $32
billion. If USPS continues to make payments based on the latter figure, the liability
will eventually be overfunded by $71 billion. In announcing this good news, the
postmaster general said that if Congress promptly passes draft legislation developed
by OPM to reduce its annual payment, USPS will be able to reduce its debt by $3
billion in FY2003, and defer the next postage rate increase from 2004 to 2006.
Two elements of USPS financing of Civil Service Retirement System (CSRS)
benefits distinguish it from other federal agencies, and are important factors in the
potential overfunding. First, under law, USPS is responsible only for CSRS benefits
that were earned by USPS employees after June 30, 1971. Consequently, a
significant proportion of the early contributions to the Civil Service Retirement and
Disability Fund remained in the fund and was credited with interest from year to year.
Second, due to a series of laws passed between 1989 and 1993, USPS has been
required to pay for the increases in CSRS pensions that result from annual cost-of-
living adjustments. As a result, USPS – unlike any other federal agency – is required
to pay into the fund an amount that approximates the full cost of the Civil Service
Retirement System. It is these two factors, in combination with the interest earnings
in excess of the assumed 5% rate of return,
that could lead to pension contributions
and interest earnings exceeding the value of CSRS benefits owed to USPS retirees
and their survivors.
USPS, OPM, the Office of Management and Budget, the Department of the
Treasury, and mailers groups all support the draft legislation. No public opposition
has yet been voiced, but several obstacles could hinder its consideration. The largest
postal workers union has observed that there is nothing in the proposal that benefits
postal workers, and that deferring a postage rate increase from 2004 to 2006 could
impede its effort to reduce work-sharing benefits now enjoyed by large mailers. It
is not yet clear whether offsetting savings would need to be found in the budget to
make up for the $2.9 billion by which the legislation would reduce USPS payments
to the retirement fund. Finally, it could be argued that the availability of unexpected
new financial resources would best be addressed in the context of the report of a new
blue ribbon presidential commission on postal affairs, which is due in July 2003.
This report provides background on USPS funding of its retirement obligations,
describes and analyzes the OPM recalculation, and discusses considerations Congress
may bring to bear on the draft legislation. It will be updated in the event of any new
developments.

Contents
Background: USPS Payments for Pensions under CSRS and FERS . . . . . . . . . . 2
Civil Service Retirement System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Federal Employees Retirement System . . . . . . . . . . . . . . . . . . . . . . . . . 4
The OPM Analysis of USPS Contributions for CSRS Benefits . . . . . . . . . . . . . . 4
The interest rate used in CSRS financing . . . . . . . . . . . . . . . . . . . . . . . 5
Estimated amount of future overfunding . . . . . . . . . . . . . . . . . . . . . . . . 6
Limitations of the estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
USPS Wants to Reduce Its CSRS Payments to OPM . . . . . . . . . . . . . . . . . . . . . . 7
Proposed legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Prospects for the legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Funding Postal Service Obligations to the
Civil Service Retirement System
The U.S. Postal Service (USPS) faces a long term financial prospect that calls
into question its ability to provide universal service at present levels without using
appropriated funds. Steadily rising costs stemming from the addition of 1.7 million
new delivery points each year, and from an inability to control its labor contracts,
threaten to outstrip revenues. Use of the mail for correspondence, advertising,
package delivery, and financial transactions is declining in competition with
electronic and private sector alternatives. USPS, the General Accounting Office
(GAO), and a growing number of postal stakeholders believe the postal business
model will not work in the 21st century.1 On December 11, 2002, President Bush
appointed a nine-member commission to examine alternative futures for the Postal
Service.
Much of the concern about the Postal Service’s ability to survive has stemmed
from its deferred liabilities. Not only must it recover from ratepayers the direct costs
of delivering their mail in the future, it must also generate enough revenue to pay its
debts built up from infrastructure investments, accumulated losses, and commitments
to retirees and their survivors that were made many years in the past. According to
the GAO, these liabilities and obligations “amount to almost $100 billion and
threaten the Service’s ability to continue to fulfill its mission.”2 Specifically, GAO
identified a deferred liability of $32 billion for pensions, and noted that USPS would
also have to pay $16 billion in interest associated with the pension obligations. In all,
retirement costs would rise to $16 billion annually by 2010 – an amount that
ratepayers would have to pay before devoting a single dollar to salaries,
transportation, or electricity.3
Lately, however, the Office of Personnel Management (OPM) has released a
new analysis of the USPS obligation toward retirees in the Civil Service Retirement
System (CSRS), showing that present contribution rates will overfund the amount
needed to cover that obligation. USPS, supported by most large mailers
organizations, has asked Congress to change the statutory contribution formula in a
way that would reduce USPS revenue needs by $2.9 billion in fiscal year (FY) 2003,
and by $2.6 billion in succeeding years.
1For a detailed analysis of the USPS financial prospect, see CRS Report RL31069, Postal
Service Financial Problems and Stakeholder Proposals,
by Nye Stevens.
2U.S. General Accounting Office, U.S. Postal Service: Moving Forward on Financial and
Transformation Challenges
, GAO Testimony 02-694T, May 13, 2002, p. 12.
3Gene Del Polito, president of the Association for Postal Commerce, as quoted in Tad
Clarke, “Declining Mail Volume Not USPS’ Only Problem, Speaker Says,” DM News,
Sept. 19, 2002, p. 1.

CRS-2
This report explains this development and provides information relevant to
Congress’s consideration of the USPS request for statutory relief. It includes as
background an explanation of how USPS pays for pensions under both the Civil
Service Retirement System and the Federal Employees Retirement System (FERS),
and describes the OPM analysis leading to the conclusion that present contribution
rates are too high. It concludes with a description of draft legislation proposed by
OPM to change the contribution formula, and analysis of the various considerations
that Congress might bring to bear on the proposal.
Background: USPS Payments for Pensions under
CSRS and FERS
The Postal Reorganization Act of 1970 (P.L. 91-375) established the United
States Postal Service and provided that “officers and employees of the Postal Service
(other than the Governors) shall be covered by chapter 83 of title 5 relating to civil
service retirement.”4 Consequently, employees of the Postal Service continued to
participate in the Civil Service Retirement System, in which they had participated as
employees of the Post Office Department. Today, federal and USPS employees are
covered under one of two retirement systems, depending on when they were hired.
Employees initially hired into permanent federal or USPS employment before
January 1, 1984 are covered by CSRS. Employees initially hired into permanent
federal or USPS employment after December 31, 1983 participate in FERS. FERS
also covers employees who switched from CSRS during “open seasons” in 1987 and
1998.
The contributions to the Civil Service Retirement and Disability Fund (CSRDF)
required of federal employees and their employing agencies are specified in law.5 All
monies contributed to the fund that are not needed to pay current benefits must be
invested in special-issue securities of the U.S. Treasury.6 By law, the investments of
the fund are credited with interest at a rate equal to the average market yield of
outstanding obligations of the United States Treasury with remaining maturities of
4 years or more.7
Civil Service Retirement System. The principal objective of the Postal
Reorganization Act was to establish the Postal Service as a financially independent
entity that would pay its personnel costs and other expenses from its own revenues.
However, certain costs of pension benefits under CSRS continued to be paid from
the general revenues of the U.S. Treasury. This occurred because the contributions
4See 39 U.S.C. § 1005(d). As amended by the Federal Employees Retirement System Act
of 1986 (P.L. 99-335), this section now says that “officers and employees of the Postal
Service (other than the Governors) shall be covered by chapters 83 and 84 of title 5.”
5 5 U.S.C. 8334, 8422, and 8423.
6 5 U.S.C. 8348(c).
7 5 U.S.C. 8348(d).

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to the CSRS made by employees and their employing agencies (including the Post
Office Department and, later, USPS) were not adequate to fully fund the retirement
annuities paid by CSRS. The Civil Service Retirement Amendments of 1969 (P.L.
91-93) required both participating employees and their employing agencies each to
contribute an amount equal to 7.0% of basic pay to the CSRDF to finance retirement
benefits under CSRS. The Postal Service pays the employer contribution for USPS
employees from the revenue it receives from customers, while other federal agencies
pay the employer contribution from amounts appropriated annually by Congress.
The combined contributions from employees and employing agencies – equal
to 14% of employee pay – are not sufficient to finance the retirement benefits
provided under the Civil Service Retirement System. The costs of CSRS that are not
financed by the 7.0% employee and 7.0% agency contributions are attributable
mainly to increases in future CSRS benefits that result from (1) employees’ annual
pay raises, and (2) annual cost-of-living adjustments in the pensions paid to CSRS
annuitants. In actuarial terms, the employee and agency contributions totaling 14%
of pay are equal to the static normal cost of CSRS benefits.8 This is the benefit that
would be paid if employees received no future pay raises and annuitants received no
future cost-of-living adjustments. The dynamic normal cost of CSRS pensions
includes the cost of financing future benefit increases that result from pay raises and
cost-of-living adjustments.9 The dynamic normal cost of CSRS has been estimated
by OPM to be an amount equal to 24.4% of employee pay.
For non-postal federal employees covered by CSRS, the federal government
pays somewhat more than half of the 10.4 percentage point difference between the
14% of pay contributed by employees and their employing agencies and the 24.4%
normal cost of the program. This additional contribution by the federal government
is a direct transfer from the general revenues of the Treasury to CSRDF. It does not
pass through individual agency budgets. The remaining cost of CSRS constitutes an
unfunded liability of the system. This liability eventually will be borne by the
Treasury when CSRS annuities are paid to retirees and their surviving dependents.
From 1974 through 1993, Congress passed several laws that gradually
transferred to USPS all costs associated with CSRS benefits accrued by USPS
employees since July 1, 1971, including the costs resulting from employees’ pay
raises and retirees’ cost-of-living adjustments.10 The cumulative effect of these laws
has been that all CSRS benefits accrued by USPS employees since July 1971 have
been fully financed, either by retroactive payments by USPS or by payments that are
8A pension plan’s normal cost is the level percentage of pay that, invested today at a
particular assumed real rate of interest, will be sufficient to fully finance the retirement
benefits under the plan.
9 Two other elements of a pension plan’s dynamic normal cost are increases in benefits that
result from (1) new or expanded benefits and (2) newly covered groups of workers. These
have not been significant elements of the dynamic normal cost of the CSRS benefits of
Postal Service employees.
10These laws include P.L. 93-349, P.L. 100-203, P.L. 101-239, P.L. 101-508, and P.L. 103-
66.

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mandated by law to be made each year by the USPS.11 A memorandum prepared by
CRS in June 1997 stated that:
As a result [of these laws], there are no unfunded pension liabilities for CSRS
benefits earned by USPS employees since the USPS was established. All postal
employee retirement benefits accrued since June 30, 1971 have been financed
either through lump-sum payments from the USPS, or are fully paid for on an
ongoing basis by the combination of employee contributions and USPS
payments.12
Federal Employees Retirement System. As of March 2002, 66% of the
USPS active workforce were covered by FERS. The normal cost of the pension
component of FERS has been estimated by OPM to be 11.5% of pay. For both postal
workers and other federal employees, FERS is fully funded by the combination of
employee contributions (currently 0.8% of pay for most workers) and agency
contributions (currently 10.7% of pay). USPS pays the agency share of FERS from
postal revenues. Unlike CSRS, FERS has no unfunded pension liabilities. The full
dynamic normal cost of the FERS basic retirement annuity is required by law to be
fully financed by the sum of employee and agency contributions.
The OPM Analysis of USPS Contributions for CSRS
Benefits

In the course of its review of USPS finances carried out at the request of the
Senate Committee on Governmental Affairs, GAO realized that there was no
contemporary accounting of the Service’s obligations to the Civil Service Retirement
and Disability Fund. It therefore requested that OPM review the Service’s CSRS
financing as if a separate retirement account had been established for income and
benefit payments since USPS was established as an independent entity in 1971.
OPM undertook and completed the review, though it did not report back to GAO on
it. The director of OPM, Kay Coles James, wrote the postmaster general on
November 1, 2002, notifying him that OPM actuaries “project that future payments
required under current legislation will overfund your estimated CSRS liability by
approximately $71 billion.”
In a memorandum summarizing their study, OPM stated that “our analysis
shows that the net accumulated value of USPS payments already received is currently
approaching the value of its projected future CSRS benefits. [I]f the current funding
provisions remain in place, USPS will pay substantially more than will be needed to
fund future benefits.” The OPM summary further stated that “the major reason for
the projected over-funding is due to the excess interest earned by the fund; that is,
11It is important to note that financing a defined-benefit pension plan necessarily requires
a number of economic and demographic estimates and assumptions, any of which may prove
to be wrong.
12CRS Congressional Distribution Memorandum, “United States Postal Service Employee
Benefit Costs,” Carolyn L. Merck, June 5, 1997.

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interest earnings in excess of the 5% that was assumed under the statutory funding
method.”
The OPM analysis also pointed out two elements of the Postal Service’s
financing of CSRS benefits that distinguish it from other federal agencies, and which
are important factors in the potential overfunding of CSRS benefits for employees
of the Postal Service. First, under law the Postal Service is responsible only for CSRS
benefits that were earned by USPS employees after June 30, 1971. Consequently, a
significant proportion of the Postal Service’s early contributions to the Civil Service
Retirement and Disability Fund remained in the Fund and were credited with interest
from year to year. Second, due to a series of laws passed between 1989 and 1993,
USPS is required to pay for the increases in CSRS pensions that result from annual
cost-of-living adjustments (COLAs). As a result, the Postal Service – unlike any
other federal agency – is required to pay into CSRDF an amount that approximates
the full cost of the Civil Service Retirement System. It is these two factors, in
combination with the interest earnings in excess of the assumed 5% rate of return,
that could lead to pension contributions and interest earnings exceeding the value of
CSRS benefits owed to USPS retirees and their survivors.
The interest rate used in CSRS financing. Federal law requires the
Postal Service to finance the increases in CSRS annuities that result from pay raises
and cost-of-living adjustments by amortizing the increased costs over periods of 30
years and 15 years, respectively.13 The payments must be made in “equal annual
installments with interest computed at the rate used in the most recent valuation of
the Civil Service Retirement System.”14 According to OPM, “the assumed interest
rate used in CSRS financing has been set at 5% since 1972.” However, while OPM
uses a 5% interest rate in its static valuation of CSRS, it currently uses a nominal
interest rate of 6.75% when valuing the liabilities of the CSRS on a dynamic basis.15
The dynamic valuation of CSRS liabilities is a more accurate measure of the present
value of future CSRS annuities. Since the enactment of the Omnibus Budget
Reconciliation Act (OBRA) of 1990 – which required the Postal Service to pay for
the increase in CSRS liabilities resulting from COLAs granted since 1971 and to
amortize the cost of future COLAs – USPS has been paying the full dynamic cost of
CSRS. It could be argued that after the enactment of the OBRA of 1990, OPM
should have based each new series of Postal Service amortization payments under 5
U.S.C. 8348(h) and 8348(m) on the rate of interest that it used in its most recent
dynamic valuation of CSRS. It is important to note, however, that the Postal
Service’s projected over payments to CSRS are due to the combined effects of
several factors, as described immediately above. Thus, even if after 1990 USPS
payments under 5 U.S.C. 8348(h) and 8348(m) had been based on the rate of interest
that OPM used in its most recent dynamic valuation, the overfunding of CSRS that
13 5 U.S.C. §§ 8348(h) and 8348(m).
14 5 U.S.C. §§ 8348(h)(2) and 8348(m)(2).
15U.S. Office of Personnel Management, Civil Service Retirement and Disability Fund,
Report for Fiscal Year 2001
, p.12; and Funding of CSRS Benefits by the Postal Service,
Nov., 2002, p. 4.

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OPM currently projects would not have been eliminated; it would, however, have
been reduced.
Estimated amount of future overfunding. In its analysis of USPS
liabilities to CSRS, OPM estimated the present value of future CSRS benefits
payable to USPS annuitants to be $172.6 billion as of September 30, 2002.16 OPM
estimated the amount now in the CSRDF that is attributable to payments by USPS
and its employees (and to interest credited to those payments) at $152.1 billion.17
OPM estimated the present value of future payments into the CSRDF on behalf of
Postal Service CSRS participants (and interest on those payments) at $91.5 billion.
Therefore, the sum of CSRDF assets attributable to the USPS and the future income
to the CSRDF is $243.6 billion.18 This exceeds the estimated present value of future
benefits by $71.0 billion, which is the amount that OPM has identified as “potential
overfunding” of CSRS benefits payable to USPS annuitants and their surviving
dependents.19 OPM Director James’ November 1, 2002 letter to the postmaster
general made it clear that, “(w)hile significant overfunding is projected to occur in
the future under current law, none has occurred to date. In fact, we estimate $20.5
billion in future benefits remains to be funded.” Future normal contributions will
fund $15.5 billion of the shortfall, leaving $5 billion still to be funded. Still, this is
considerably less than the $32 billion shortfall that had hitherto been assumed to
exist.
Limitations of the estimates. Each of the estimates underlying the OPM
recalculation of USPS retirement obligations is, necessarily, based on assumptions
about the future. OPM noted in the summary of its analysis that “the amount of
projected over-funding is an estimate and will vary depending on future economic
and demographic experience.” Elsewhere, OPM has stated that “the normal cost and
actuarial liability of the retirement system depend primarily on the real interest rate
and on the difference between the interest rate and the salary increase assumption.”20
The estimated present value of future USPS benefits under CSRS ($172.6 billion) is
based on estimates that in the long-term, inflation will average 3.75% per year,
annual pay raises will average 4.25%, and the real rate of interest will be 3.0%. (The
real rate of interest is the difference between the nominal interest rate and the rate of
inflation. OPM’s estimates are based on a nominal interest rate of 6.75% and an
inflation rate of 3.75%). To the extent that actual experience differs from these
estimates, the liabilities of the retirement system could be higher or lower than OPM
has estimated.
16The present value of a future stream of income or expenditure is the amount that would
be needed today to generate that stream of income or payments, assuming a particular
investment rate of return.
17This is the sum of contributions by the USPS and its employees plus interest on those
contributions, minus the amount paid to annuitants that is attributable to service after June
30, 1971, when USPS was formed.
18 152.1 + 91.5 = 243.6
19 243.6 - 172.6 = 71.0
20Civil Service Retirement and Disability Fund, Report for Fiscal Year 2001, p. 7.

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The future liabilities of CSRS also will depend on the demographic experience
of the program, mainly the number of people who receive CSRS annuities and the
length of time over which those annuities are paid. Actuaries can estimate life
expectancy and average age of retirement, but the timing of retirement can change
as a result of government policy. For example, downsizing of agencies or
privatization of government functions could lead to people retiring from the federal
government earlier, and collecting benefits longer, than had been assumed. The
reduction in benefits under CSRS for early retirement is 2% per year, which is lower
than an “actuarially fair” reduction would be.21 Changes in government policy that
result in an increase in early retirement would therefore increase the liabilities of
CSRS. Such changes in policy are, of course, unpredictable. Nevertheless, they
provide an example of the uncertainty of the estimates of the future liabilities of the
CSRS.
Several Members of Congress, including the former chairman of the House
Postal Service Subcommittee, Representative John McHugh, have asked the General
Accounting Office to review the calculations leading OPM to the conclusion of
overfunding. According to GAO official Bernard L. Ungar, the “reliability check”
GAO has undertaken should be done “fairly quickly,” early in 2003.22
USPS Wants to Reduce Its CSRS Payments to OPM
The postmaster general announced what he called the “good financial news”
to the USPS board of governors and to the public on November 5, 2002.23 Reaping
the benefit from the OPM recalculation, he said, would allow USPS to reduce its debt
to the Treasury by $3 billion in FY2003. Of even more significance to the mailing
community, however, he also said that changing the funding formula would allow
USPS to defer the next rate increase from early 2004, when it is now expected, to
2006. The news has been greeted with great fanfare by mailing organizations.24
Proposed legislation. The postmaster general emphasized, however, that
none of this could take place without a change in the law. In fact, OPM had already
drafted legislation that would, if enacted, allow USPS to fund future CSRS benefits
on a dynamic, normal cost basis. The draft bill, entitled the “Postal Civil Service
21Under FERS the reduction in benefits for workers who retire between ages 55 and 62, with
at least 10 but fewer than 30 years of service, is 5% per year. (The reduction is 5%
multiplied by the number of years between the worker’s age at the time of retirement and
62.) Under Social Security, the reduction for claiming retired worker benefits before the
normal retirement age ranges from 5.0% to 6.7% per year, depending on the individual’s age
at retirement and the normal retirement age.
22Melissa Campanelli, “GAO Begins Review of Postal Possible Retirement Funding
Change,” DM News, Nov. 22, 2002.
23USPS press release, [http://www.usps.com/news/2002/press/pr02_pmg1105.htm], Nov.
5, 2002, p. 2, visited Jan. 2 , 2003.
24For one example, see Cary H. Baer, “Are We Entering an Era of ‘Pax Postal’?,” DM News,
Nov. 26, 2002.

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Retirement System Funding Reform Act,” has been circulated to the House
Government Reform and Senate Governmental Affairs Committees, where USPS
expects that senior Members will introduce it early in the 108th Congress. According
to the postmaster general, “the Administration will support the change and OMB,
OPM, and the Department of the Treasury have offered their support to brief
lawmakers on Capitol Hill.”25
A statutory change is needed for USPS to be able to reduce its contributions to
CSRDF because current law specifies that USPS payments are to be based on the
static normal cost of benefits. The proposed law would change the funding formula
to a dynamic normal cost assumption. It would raise the USPS contribution from 7%
to 17.4% for current employees, and thus fully fund current obligations for CSRS
employees just as FERS employees are now fully funded. This would cost $1.1
billion more than USPS is now paying. Where money would be saved – $4 billion
– would be in the reduction of the deferred retirement liability from $32 billion to $5
billion, and lengthening the amortization schedule for the remaining $5 billion from
30 to 40 years. USPS has said that the overall effect would be a reduction of $2.9
billion in payments to CSRDF in FY2003, and $2.6 billion in subsequent years when
the amortization schedule becomes effective. To give a perspective on these
amounts, USPS expenses in FY2002 were $67.2 billion, and the amount realized
annually from the 7.7% negotiated postage rate increase on June 30, 2002 is about
$5.2 billion.26
Prospects for the legislation. Mailers organizations have asked the White
House and their members to press their contacts on Capitol Hill to support the
legislation OPM has drafted. In announcing the recalculation of USPS’s retirement
fund obligations, the postmaster general not only emphasized that the Administration
supported the proposal, he also put the benefits in terms that mailers could readily
understand. He said that if legislation were passed to reduce the Service’s
contributions to CSRDF, it would delay the next rate increase by 2 full years, to
2006. It would also allow USPS to pay down its debt to the Treasury, now about $11
billion, by $3 billion in the current fiscal year. This also would benefit mailers
because it would reduce annual interest payments to the Treasury, which in turn
would lower the revenue requirement that is ultimately paid by mailers through the
rate process. In their communications on the issue, mailers say that ensuring postage
rate stability until 2006 will allow them to invest billions of dollars in their
businesses, stimulating the economy locally and nationally. “Businesses would use
those funds to hire employees, boost advertising dollars and stimulate consumer
spending. However, if Congress fails to pass the legislation, businesses will instead
spend those billions of dollars on increased postage rates.”27
Supporters of the legislation have emphasized that there is certain sense of
urgency about it. Because the normal rate-setting process takes a minimum of 10
25USPS press release no. 83, [http://www.usps.com/news/2002/press/pr02_083.htm] Nov.
5, 2002, p.2, visited Jan. 2, 2003.
26See CRS Report RS21192, The 2002 Postage Rate Increase, by Nye Stevens.
27[http://www.postcom.org/public/csrs/postcom_csrs_q&a.htm], visited Jan. 2, 2003.

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months after a case is filed with the Postal Rate Commission, preparations for the
filing need to begin almost immediately if increased rates are to take effect early in
2004. Preparations for a rate case are a major investment not only for USPS, but also
for interveners like mailers, unions, and competitors.
There has been no publicly voiced opposition to the legislation so far, but
several obstacles can be foreseen. The United Parcel Service, whose opposition to
H.R. 4970 is widely credited with shelving comprehensive postal reform legislation
in the 107th Congress, has reportedly told congressional staff members that it would
not oppose the legislation if it is considered as a “clean bill,” without the
complication of added amendments. The American Postal Workers Union points out
that USPS has no plans to “share the surplus with employees in the form of higher
wages and improved working conditions,”28 and that a delay in postage rate increases
to 2006 would “impede our effort to reduce the subsidies big mailers now enjoy
under the management’s discounted postage work-share programs.”29 Lukewarm
support from labor could stall the legislation.
Another obstacle could be the need to find offsetting savings in the federal
budget for what could amount to a $2.9 billion reduction in offsetting receipts. The
Congressional Budget Office has not yet scored the proposal. Under past budget
enforcement procedures, a $2.9 billion reduction in the Postal Service’s contribution
to the CSRS Fund might have required the enactment of offsetting savings elsewhere.
However, expiration of certain enforcement procedures that would apply to such a
proposal, and uncertainty regarding the extension of these procedures, makes the
procedural situation unclear.
Finally, it could be argued that now is not a propitious time for Congress to act.
OPM does not assert that USPS has, as of today, overfunded its CSRS obligation,
just that it will in the future if the formula is not changed. GAO is still carrying out
a “reliability check” of the OPM calculations. The President has just appointed a
blue ribbon commission to review the Postal Service, and it is expected to report on
July 31, 2003.30 Deferring a decision on the funding question until the commission
has made its recommendations could allow the matter to be addressed in a larger
context, taking into account the overall financial situation and prospects of USPS in
the decades to come.
28[http://www.apwu.org/burrusupdates/burrusupdate2002.htm], visited Dec. 27, 2002.
29[http://www.apwu.org/burrusupdates/burrusupdate1902.htm], visited Dec. 27, 2002.
30U.S. President George W. Bush, “President’s Commission on the United States Postal
Service,” Executive Order 13278, Federal Register, vol. 67, Dec. 13, 2002, p. 76671.