"NEWS AND COMMENT"

In a “news and comment” piece, PostCom Vice President Kate Muth considers the administration’s position on a key sticking point in the postal reform bills: responsibility for the military service costs of postal retirees.

Announcer: In this corner, the heavyweight champion of the world: the Bush administration, which is adamantly opposed to having the Treasury Department pay the pension costs for the military years of service of postal employees. 

And in this corner, the scrappy opponent: those who support returning the military service costs back to the Treasury Dept. including Senators Collins, Carper and Stevens; Reps. Davis and Waxman; the postmaster general of the United States; mailers of all shapes and sizes; and the comptroller general of the United States. 

Folks, the administration has dug in for a tough battle on this one. It’s gone for the old rope-a-dope tactic used by the greatest heavyweight fighter of all time, the incomparable Muhammad Ali. You remember rope-a-dope. The opponent gets in a number of body shots, thinking he or she has worn down the champ, only to realize that the champ is letting the upstart wear himself down. Then, the champ comes out swinging,  

And “comes out swinging” is exactly what the administration has done this past week. In a recent media briefing with trade reporters and trade groups, Acting Director of the Office of Personnel Management (OPM) Dan Blair restated the administration’s firm position that the Postal Service should fund the military service pension costs of postal employees. Blair said this position upholds the administration’s guiding principle on postal reform that the Postal Service is “self-financing,” meaning revenues from ratepayers must fund the employer obligations, including recognizing military service in its retirement accounting. He called this a “normal cost of doing business.” 

Blair also argued that the legislation that reduced postal pension obligations by $78 billion provided a model funding structure for postal pension obligations under the Civil Service Retirement System (CSRS). Now, funding is patterned after the Federal Employee Retirement System (FERS), a “fully funded, actuarially sound pension system whereby all agencies are required to fully fund retirement costs, including all military service costs.” His comments in the media briefing echoed his testimony before the Senate Homeland Security and Governmental Affairs Committee hearing on April 14. 

A boxing analogy seems appropriate given the huge “purse” at stake in this fight: $27 billion is what the military pension costs add to the Postal Service’s budget. Of this total, $17 billion is money that Treasury already has paid for military service pension costs, but now the USPS must repay under Public Law 108-18, the Postal Civil Service Retirement System Reform Act of 2003. Both the Senate and House postal accountability legislation would relieve the Postal Service of this obligation and return military service costs back to Treasury. The bills would also require the Postal Service to begin prefunding long-term health care obligations for retirees. 

The administration opposes the funding aspects of both bills because they would add to the overall federal budget deficit. Mailers, the Postal Service and key members of Congress argue that it is unfair to require the Postal Service to pay for the retirement costs of military service, something that has benefited the entire nation.

            ** Rep. Tom Davis, R-VA and chairman of the House Government Reform Committee, called it “nothing more than an accounting gimmick.”

            ** Sen. Susan Collins, R-ME and chairman of the Senate oversight committee, said “I believe it is unreasonable and unfair to ask the Postal Service to pay the retirement costs for the military service of its employees. As the President’s own Commission on the Postal Service noted, this provision ‘asks those who use the nation’s postal system to subsidize the military every time they use the mail.’”

            ** PMG Jack Potter noted that “while we support veterans’ preference, shifting responsibility for military service from taxpayers to ratepayers is unfair. If this requirement is not removed, the Postal Service will be the only federal agency with employees covered by the Civil Service Retirement System that is required to fund these benefits.”

            ** The Government Accountability Office’s Comptroller General David Walker said at a recent hearing that since all Americans benefited from the military service of postal employees, the Treasury Department should pay this cost. Further, he noted that no other federal agency funds this cost. 

One can use any number of metaphors or clichés to describe the current situation, they all would be accurate: the administration has drawn a line in the sand; we’ve reached a stalemate, a standoff, an impasse on the military pension cost issue. The public position of the administration is that it is not budging on the military service issue. When asked if there was an opportunity for compromise on the issue, OPM’s Blair responded that “the administration’s position on this issue has been consistent.” When asked if that was a “no,” Blair would only say the administration’s position has been “consistent.” Further, Blair noted that the administration supports efforts to enact comprehensive postal reform this year. 

So, it’s not an outright “no.” And this is Washington, DC – a town built on compromise -- so negotiation on the issue is possible. 

There’s another appealing aspect of the boxing metaphor, though, and it is this: everyone loves an underdog. It appears the mailing industry is the underdog on this card, and it’s not ready to throw in the towel. And, mailers are on the “side of angels” in this argument. That is to say, we are right in our argument regarding this military service issue. 

As Sen. Collins noted in her opening comments at last week’s hearing, postal ratepayers are being asked to subsidize the military. So don’t throw in the towel yet, mailers. Otherwise, you may discover in a future rate case that you are being asked to fund an aircraft carrier or a fleet of tanks.