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111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    111-216

======================================================================



 
       UNITED STATES POSTAL SERVICE FINANCIAL RELIEF ACT OF 2009

                                _______
                                

 July 21, 2009.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Towns, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                         [To accompany H.R. 22]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 22) to amend chapter 89 of title 5, 
United States Code, to allow the United States Postal Service 
to pay its share of contributions for annuitants' health 
benefits out of the Postal Service Retiree Health Benefits 
Fund, having considered the same, report favorably thereon with 
an amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Legislative History..............................................     4
Section-by-Section...............................................     4
Explanation of Amendments........................................     5
Committee Consideration..........................................     5
Rollcall Votes...................................................     5
Application of Law to the Legislative Branch.....................     5
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     5
Statement of General Performance Goals and Objectives............     5
Constitutional Authority Statement...............................     5
Federal Advisory Committee Act...................................     6
Unfunded Mandates Statement......................................     6
Earmark Identification...........................................     6
Budget Authority and Congressional Budget Office Cost Estimate...     6
Changes in Existing Law Made by the Bill, as Reported............    10

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``United States Postal Service Financial 
Relief Act of 2009''.

SEC. 2. GOVERNMENT CONTRIBUTIONS FOR POSTAL ANNUITANTS' HEALTH 
                    BENEFITS.

  (a) In General.--Paragraph (2)(A) of section 8906(g) of title 5, 
United States Code, is amended to read as follows:
  ``(2)(A)(i) The Government contributions authorized by this section 
for health benefits for an individual who first becomes an annuitant by 
reason of retirement from employment with the United States Postal 
Service on or after July 1, 1971, or for a survivor of such an 
individual or of an individual who died on or after July 1, 1971, while 
employed by the Postal Service, shall----
          ``(I) except as provided in clause (ii), be paid by the 
        Postal Service through September 30, 2016; and
          ``(II) after September 30, 2016, be paid first from the 
        Postal Service Retiree Health Benefits Fund up to the amount 
        contained in the Fund, with any remaining amount paid by the 
        Postal Service.
  ``(ii) The Government contributions payable under this paragraph for 
a fiscal year which is within the period beginning with fiscal year 
2009 and ending with fiscal year 2011 shall be paid in the manner set 
forth in clause (i)(II) (rather than clause (i)(I)).''.
  (b) Effective Date; Recovery of Prior Payments; Definitions.----
          (1) Effective date.--This section and the amendment made by 
        this section shall be effective as of October 1, 2008, and 
        shall apply with respect to Government contributions payable 
        for pay periods beginning on or after that date.
          (2) Recovery of prior payments.--In the case of any direct 
        contributions made for any pay period beginning on or after the 
        effective date of this section and ending before the date of 
        enactment of this Act, the United States Postal Service may 
        recover the amount of those direct contributions so made 
        through offsets against any amounts which (but for this 
        paragraph) would otherwise be payable, on or after such date of 
        enactment, under section 8909a of title 5, United States Code.
          (3) Definition.--For purposes of this subsection the term 
        ``direct contributions'' refers to contributions payable in the 
        manner described in subclause (I) of section 8906(g)(2)(A)(i) 
        of title 5, United States Code (as amended by subsection (a)).

SEC. 3. TECHNICAL CORRECTION.

  The heading for section 8909a of title 5, United States Code, is 
amended by striking ``Benefit'' and inserting ``Benefits''.

                          Purpose and Summary

    H.R. 22, the United States Postal Service Financial Relief 
Act of 2009, was introduced by Representative John McHugh on 
January 6, 2009. H.R. 22, as ordered reported, would amend 
title 5 of the United States Code to permit the United States 
Postal Service (Postal Service) to pay the health care premiums 
for its current retirees from the Postal Service Retiree Health 
Benefits Fund (RHBF) in fiscal years 2009, 2010, and 2011. The 
legislation would provide temporary financial relief to the 
Postal Service, saving over $2 billion in operating funds each 
fiscal year between 2009 and 2011. In short, the bill is 
intended to provide the Postal Service with relief from its 
current financial crisis.

                  Background and Need for Legislation

    The Postal Accountability and Enhancement Act\1\ (PAEA) 
requires the Postal Service to make two separate payments for 
postal retiree health benefits. Through September 30, 2016, the 
Postal Service must pay its share of insurance premiums for 
current annuitants' health benefits.\2\ The Postal Service 
estimates these payments at about $2 billion per year 
currently, rising eventually to $4.2 billion. The premium 
payments are made monthly out of the Postal Service's operating 
funds.
---------------------------------------------------------------------------
    \1\P.L. 109-435.
    \2\5 U.S.C. 8906(g)(2)(A).
---------------------------------------------------------------------------
    In addition, the PAEA established the RHBF and required the 
Postal Service to annually deposit funds to pre-fund the health 
insurance premiums of future Postal Service retirees.\3\ The 
PAEA specifies the payments for the first ten years, ranging 
from $5.4 billion to $5.8 billion for fiscal years 2007 through 
2016.\4\ After 2016, the Office of Personnel Management is 
directed to recalculate the amount of the remaining liability 
and to establish a payment schedule to amortize the remaining 
liability.\5\ The payment schedule for the first ten years was 
established primarily to make the PAEA budget neutral, 
responding to the concerns of the Office of Management and 
Budget at the time the PAEA was passed, rather than 
corresponding to actuarial requirements or financial conditions 
at the Postal Service.
---------------------------------------------------------------------------
    \3\5 U.S.C. 8909a(a).
    \4\5 U.S.C. 8909(a)(d)(3)(A).
    \5\5 U.S.C 8909a(d)(2)(B).
---------------------------------------------------------------------------
    Faced with a steep decline in mail volume, rising costs, a 
growing delivery network, and the recession, the Postal Service 
is presently experiencing an unprecedented deterioration in its 
financial condition. For May 2009, the Postal Service's 
preliminary, unaudited financial reports showed a loss of 
nearly $700 million, largely due to ongoing decreases in mail 
volume. This followed a loss of $1.9 billion in the second 
quarter of FY 2009.\6\ In May 2009, the Postal Service reported 
that it had incurred net losses from operations in 10 of the 
previous 11 fiscal quarters and anticipates losses of over $6 
billion and a cash shortfall of over $1.5 billion for the 
year.\7\ The retiree health benefits payments required by the 
PAEA have accelerated this financial crisis.
---------------------------------------------------------------------------
    \6\US Postal Service. (2009). SEC Form 10-Q for the quarter ended 
March 31, 2009. Available online from the Postal Regulatory Commission 
at http://www.prc.gov/Docs/63/63038/Final_Quarter_II_FY_09_-_10Q.pdf.
    \7\USPS, Postal Service Ends Second Quarter with $1.9 Billion Loss 
(May 6, 2009) (online at www.usps.com/communications/newsroom/2009/
pr09_047.htm).
---------------------------------------------------------------------------
    As amended, H.R. 22 would amend chapter 89 of title 5, 
United States Code, to allow the Postal Service's share of 
contributions for annuitants' health benefits to come out of 
the RHBF for FY 2009 through FY 2011. H.R. 22 would provide 
approximately $2 billion in relief to the Postal Service in FY 
2009 and over $2 billion in subsequent years. H.R. 22 would not 
affect the Postal Service's legal obligation to continue making 
payments into the RHBF to pre-fund future retirees' health 
premiums. The RHBF contains about $32 billion and will continue 
to grow after H.R. 22 is enacted into law.\8\
---------------------------------------------------------------------------
    \8\National League of Postmasters of the U.S., Refinancing USPS 
Retiree Health Benefits, Postmasters Advocate (March 2009).
---------------------------------------------------------------------------
    The Postmaster General has stated that, given its current 
financial situation, the Postal Service is not in a position to 
reduce its current cost-cutting efforts even if Congress 
provides financial relief by enacting H.R. 22.\9\ In addition, 
the Inspector General of the Postal Service testified that even 
if the Postal Service meets its aggressive cost-cutting goals 
for FY 2009, it would face ``a gap between costs and revenues 
of as much as $6 billion,''\10\ further underscoring that the 
Postal Service would continue to cut costs despite receiving 
relief under H.R. 22.
---------------------------------------------------------------------------
    \9\Letter of Postmaster General John E. Potter to Congressional 
Budget Office Director Douglas Elmendorf (March 25, 2009).
    \10\Committee on Oversight and Government Reform, Hearing on 
Restoring the Financial Stability of the U.S. Postal Service: What 
Needs to be Done? Written testimony of David Williams, Inspector 
General of the United States Postal Service, 111th Congress (Mar. 25th, 
2009).
---------------------------------------------------------------------------

                          Legislative History

    H.R. 22 was introduced on January 6, 2009 by Representative 
McHugh and referred to the Committee on Oversight and 
Government Reform and the Subcommittee on Federal Workforce, 
Postal Service, and the District of Columbia. As introduced, 
H.R. 22 would permit the Postal Service to pay its share of its 
current retirees' health premiums out of the RHBF for eight 
years.
    On March 25, 2009, the Subcommittee held a hearing entitled 
``Restoring the Financial Stability of the U.S. Postal Service: 
What Needs to be Done,'' at which the bill was discussed.
    The Subcommittee held a markup of H.R. 22 on June 24, 2009, 
and adopted by voice vote an amendment in the nature of a 
substitute to H.R. 22, limiting relief to three years. The 
Subcommittee then ordered H.R. 22 reported as amended, by voice 
vote.
    On July 10, 2009 the Committee held a markup of H.R. 22. 
The Committee adopted the Subcommittee's amendment in the 
nature of a substitute by unanimous consent, and ordered H.R. 
22 reported as amended, by voice vote.

                           Section-by-Section


Sec. 1. Short title

    The short title of the bill is the United States Postal 
Service Financial Relief Act of 2009.

Sec. 2. Government contributions for postal annuitants' health benefits

    Subsection (a) of section 2 would amend paragraph (2)(A) of 
section 8906(g) of title 5, United States Code to permit the 
Postal Service to pay its share of the health premiums for 
current retirees out of the Postal Service Retiree Health 
Benefits Trust Fund in FY 2009 through FY 2011.
    Subsection (b) would make this authority retroactive to 
October 1, 2008, and would allow the Postal Service to recover 
premium payments that it has made in FY 2009.
    Current law directs the Postal Service to begin making 
payments for the health premiums of its current retirees out of 
the RHBF in 2016. Section 2 would allow the Postal Service to 
make the payments out of the RHBF in FY 2009 through FY 2011. 
Furthermore, for monthly premium payments that the Postal 
Service has made from its operating funds from October 1, 2008 
until passage of H.R. 22, section 2 would permit the Postal 
Service to recover the total of such payments from the RHBF.

Sec. 3. Technical correction

    Section 3 would make a technical correction to section 
8909a of title 5, United States Code, by striking ``Benefit,'' 
and inserting ``Benefits.''

                       Explanation of Amendments

    An amendment in the nature of a substitute was adopted by 
unanimous consent. Rather than permitting health care premium 
payments for current postal retirees to be drawn from the RHBF 
for eight years, the amendment would authorize the Postal 
Service's share of contributions for annuitants' health 
benefits to be paid out of the RHBF for three years, FY 2009 
through 2011. The shorter period of relief reduces the 
projected cost of the bill.

                        Committee Consideration

    On Friday, July 10, 2009, the Committee met in open session 
and favorably ordered H.R. 22 to be reported to the House by 
voice vote.

                             Rollcall Votes

    No rollcall votes were taken.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to terms and conditions of 
employment or access to public services and accommodations.
    H.R. 22 is not applicable to the legislative branch in 
relation to the terms and conditions of employment or access to 
public services and accommodations.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report, including 
the need to provide temporary financial relief to the United 
States Postal Service.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report, including permitting payments for the health 
benefits premiums of current Postal Service retirees to come 
out of the RHBF rather than postal operating funds, in order to 
strengthen the short term financial position of the United 
States Postal Service.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress to enact the law 
proposed by H.R. 22. Article I, Section 8, Clauses 7 and 18 of 
the Constitution of the United States grant the Congress the 
power to enact this law.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                      Unfunded Mandates Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement on 
whether the provisions of the report include unfunded mandates. 
In compliance with this requirement, the Committee has received 
a letter from the Congressional Budget Office included herein.

                         Earmark Identification

    H.R. 22 does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9(d), 9(e), or 9(f) of rule XXI.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 22. However, clause 3(d)(3)(B) of that rule provides that 
this requirement does not apply when the Committee has included 
in its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 22 from the Director of 
the Congressional Budget Office:

                                                     July 20, 2009.
Hon. Edolphus Towns,
Chairman, Committee on Oversight and Government Reform, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 22, the United 
States Postal Service Financial Relief Act of 2009.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark 
Grabowicz.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 22--United States Postal Service Financial Relief Act of 2009

    Summary: H.R. 22 would authorize the United States Postal 
Service (USPS) to make payments for retirees' health insurance 
premiums from the Postal Service Retiree Health Benefits Fund 
(PSRHBF) for fiscal years 2009 through 2011. Under current law, 
funds in the PSRHBF are not available for spending until fiscal 
year 2017.
    CBO estimates that enacting the bill would result in on-
budget costs of about $5 billion and off-budget savings of $2.5 
billion over the 2009-2019 period. (Cash flows of the Postal 
Service are classified as off-budget, while the PSRHBF is an 
on-budget account.) Combining those effects, CBO estimates that 
the net cost to the unified budget of enacting H.R. 22 would be 
about $2.5 billion over the 2010-2019 period. All of those 
effects reflect changes in direct spending. H.R. 22 would not 
affect revenues.
    H.R. 22 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 22 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              By fiscal year, in millions of dollars--
                                                                  ------------------------------------------------------------------------------------------------------------------------------
                                                                     2009      2010      2011      2012     2013     2014     2015     2016     2017      2018      2019    2009-2014  2009-2019
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   CHANGES IN DIRECT SPENDING

On-budget Effects (PSRHBF):
    Estimated Budget Authority...................................     2,000     2,200     2,500        0        0        0        0        0      -550      -550      -550      6,700      5,050
    Estimated Outlays............................................     2,000     2,200     2,500        0        0        0        0        0      -550      -550      -550      6,700      5,050
Off-budget Effects (Postal Service Fund):
    Estimated Budget Authority...................................    -1,800    -1,100    -1,250        0        0        0        0        0       550       550       550     -4,150     -2,500
    Estimated Outlays............................................    -1,800    -1,100    -1,250        0        0        0        0        0       550       550       550     -4,150     -2,500
Total Unified Budget Effects:
    Estimated Budget Authority...................................       200     1,100     1,250        0        0        0        0        0         0         0         0      2,550      2,550
    Estimated Outlays............................................       200     1,100     1,250        0        0        0        0        0         0         0         0      2,550     2,550
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: PSRHBF = Postal Service Retiree Health Benefit Fund.
Budgetary effects in 2017 through 2019 reflect Postal Service amortization payments to the PSRHBF.

    Basis of estimate: CBO assumes that H.R. 22 will be enacted 
before the end of fiscal year 2009. The bill would authorize 
the Postal Service, over the 2009-2011 period, to shift 
payments for retirees' health insurance premiums from the off-
budget Postal Service Fund to the PSRHBF, an on-budget account 
established by the Postal Accountability and Enhancement Act 
(Public Law 109-435) to prefund retirees' health benefits. 
Under current law, funds in the PSRHBF are not available to the 
USPS for retirees' health costs until fiscal year 2017.
    CBO estimates that the government's payments for retirees' 
health insurance premiums will be about $2.0 billion in 2009, 
$2.2 billion in 2010, and $2.5 billion in 2011. Thus, the 
legislation would increase spending from the on-budget PSRHBF 
by $6.7 billion over the 2009-2011 period.
    CBO expects that savings to the Postal Service Fund would 
be less than $6.7 billion over the same period. We expect that 
lowering the health care expenses of the Postal Service Fund by 
$2 billion or more annually would cause the agency to modify 
its efforts to reduce other spending near the end of fiscal 
year 2009 and in future years. Faced with an imbalance of 
receipts from postal customers and operational costs, the 
Postal Service has made significant efforts to reduce spending 
in recent years and is expected to continue to do so.
    Early in 2009, the Postal Service announced plans to cut 
spending by $5.9 billion over the 2009-2010 period. Just a few 
months later in response to worsening financial conditions, the 
agency accelerated the cost-cutting program and aimed to cut 
$5.9 billion in 2009 alone. CBO expects that eliminating a $2 
billion expense would lead the agency to alter its cost-
reduction program by cutting spending less aggressively than it 
would without the legislation. Consequently, enacting this 
legislation would increase net postal outlays relative to 
current law.
    CBO estimates that the increase in net USPS outlays in 2009 
would be relatively small because most of the fiscal year will 
have elapsed by the time the legislation is enacted and because 
the agency's financial condition is precarious. We expect that 
changes to the USPS's cost-cutting plan would become noticeably 
larger in 2010 and 2011. We estimate that the increase in net 
USPS outlays in 2010 and 2011 would be about half of the 
government's payments for retirees' health insurance premiums 
for those years--about $1 billion in each year. (In fiscal year 
2008, on a cash basis, the Postal Service reported expenses of 
$78.6 billion.) On balance, CBO estimates that enacting H.R. 22 
would increase spending (for the unified budget) by $200 
million in 2009 and by about $2.5 billion over the 2009-2011 
period.
    H.R. 22 would have budgetary effects after 2016, but CBO 
estimates that those changes would have no net impact on 
unified budget totals. Public Law 109-435 requires the Postal 
Service to make annual amortization payments for retirees' 
health benefits into the PSRHBF beginning in 2017. Because the 
bill would reduce payments into the PSRHBF from 2009 to 2011, 
interest earnings of that fund would be lower. Thus, the annual 
amortization payments would be higher than expected under 
current law. Based on information from the Office of Personnel 
Management, CBO estimates that the increase in payments would 
be $550 million in each year, beginning in 2017. However, 
because those payments are intragovernmental transfers, 
increased spending from the Postal Service Fund would be offset 
by increased receipts into the PSRHBF, so there would be no net 
effect on the unified budget.
    Intergovernmental and private-sector mandates: H.R. 22 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal costs: Mark Grabowicz; Impact 
on state, local, and tribal governments: Elizabeth Cove 
Delisle; Impact on the private sector: Paige Piper/Bach.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *



PART III--EMPLOYEES

           *       *       *       *       *       *       *


SUBPART G--INSURANCE AND ANNUITIES

           *       *       *       *       *       *       *


CHAPTER 89--HEALTH INSURANCE

           *       *       *       *       *       *       *



Sec. 8906. Contributions

  (a) * * *

           *       *       *       *       *       *       *

  (g)(1) * * *
  [(2)(A) The Government contributions authorized by this 
section for health benefits for an individual who first becomes 
an annuitant by reason of retirement from employment with the 
United States Postal Service on or after July 1, 1971, or for a 
survivor of such an individual or of an individual who died on 
or after July 1, 1971, while employed by the United States 
Postal Service, shall through September 30, 2016, be paid by 
the United States Postal Service, and thereafter shall be paid 
first from the Postal Service Retiree Health Benefits Fund up 
to the amount contained in the Fund, with any remaining amount 
paid by the United States Postal Service.]
  (2)(A)(i) The Government contributions authorized by this 
section for health benefits for an individual who first becomes 
an annuitant by reason of retirement from employment with the 
United States Postal Service on or after July 1, 1971, or for a 
survivor of such an individual or of an individual who died on 
or after July 1, 1971, while employed by the Postal Service, 
shall--
          (I) except as provided in clause (ii), be paid by the 
        Postal Service through September 30, 2016; and
          (II) after September 30, 2016, be paid first from the 
        Postal Service Retiree Health Benefits Fund up to the 
        amount contained in the Fund, with any remaining amount 
        paid by the Postal Service.
  (ii) The Government contributions payable under this 
paragraph for a fiscal year which is within the period 
beginning with fiscal year 2009 and ending with fiscal year 
2011 shall be paid in the manner set forth in clause (i)(II) 
(rather than clause (i)(I)).

           *       *       *       *       *       *       *


Sec. 8909a. Postal Service Retiree Health [Benefit] Benefits Fund

  (a) * * *

           *       *       *       *       *       *       *