[Congressional Record Volume 149, Number 26 (Wednesday, February 12, 2003)]
[Senate]
[Pages S2363-S2366]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself, Mr. Carper, and Mr. Brownback):
  S. 380. A bill to amend chapter 83 of title 5, United States Code, to 
reform the funding of benefits under the Civil Service Retirement 
System for employees of the United States Postal Service, and for other 
purposes; to the Committee on Governmental Affairs.
  Ms. COLLINS. Mr. President, today, I rise to offer to the Senate some 
good news for our mailers and, indeed, anyone who uses the United 
States Postal Service. The USPS, which has been losing significant 
amounts of money in recent years despite repeated increases in postage 
rates, has determined that its finances are in better order than 
previously thought. If Congress acts expeditiously on legislation that 
I am introducing today along with my colleague, Senator Carper, the 
Postal Service will avoid an imminent rate hike.
  In recent years, the United States Postal Service has been raising 
postal rates at a rapid pace. When the USPS last raised rates in 2002, 
it was the third such rate increase during an 18-month period. Such 
steep, irregular rate increases make it very difficult for businesses 
to plan for their postal costs. This is a particular problem for

[[Page S2364]]

catalog companies and magazine publishers, which set their prices in 
advance based on assumptions about postal rates. Mailing costs for some 
smaller catalog businesses, I am told, now can exceed production costs.
  In so many ways, postage rate increases have a significant economic 
impact. As rates increase, so do the costs Americans bear to send 
letters, mail packages, and pay their bills. Rate increases also raise 
the cost of goods, which, of course, reflect not only the cost to ship 
but also the cost to advertise by mail.
  But rate increases reflect the price of maintaining an ever-expanding 
postal network and the infrastructure to sustain it. Each year, the 
Postal Service adds 1.7 million new addresses. This equates to 4,800 
new letter carriers making deliveries to over 513 million new delivery 
stops each year, all while maintaining one of the lowest first-class 
letter rates in the world.
  In addition to providing a critical service to individual postal 
patrons, the Postal Service is a powerful economic engine. The USPS is 
the eleventh largest enterprise in the Nation with $66 billion in 
annual revenue, more than Microsoft, McDonald's and Coca Cola combined. 
While the Postal Service itself employs more than 700,000 career 
employees, it is also the linchpin of a $900 billion mailing industry 
that employs nine million Americans in fields as diverse as direct 
mailing, printing and paper production.
  That is why the deteriorating state of the United States Postal 
Service's finances has been a source of great concern to many of us. 
After several years of large losses, the USPS has been slowly 
approaching its statutory borrowing limit of $15 billion.
  A few months ago, however, the Office of Personnel Management 
discovered that the USPS will dramatically over-fund its contributions 
to the Civil Service Retirement Fund unless the law is changed. After 
having based the Postal Service's annual contributions on the 
assumption that it had an actuarial deficit of $32 billion, OPM 
discovered instead that the USPS's CSRS deficit was actually only $5 
billion. The difference is primarily due to higher than expected yields 
on pension investments by the Department of the Treasury. If the USPS 
continues to fund the CSRS at its current pace, it will over-fund its 
CSRS liability by $78 billion.
  If Congress approves the changes to the payment schedule as my bill 
provides, the Postal Service's CSRS retirement expense would be reduced 
by $2.9 billion in fiscal year 2003 and another $2.8 billion in fiscal 
year 2004. The USPS would be able to reduce its debt by more than $3 
billion in fiscal year 2003, and anticipated rate increases would be 
delayed until at least 2006, ushering in an era of stable and 
predictable postal rates.
  My initial response upon hearing this good news was one of pleasant 
surprise but mixed, I admit, with a healthy dose of skepticism. As the 
old saying goes, ``if it sounds too good to be true, it probably is.'' 
However, the Office of Management and Budget, as well as the U.S. 
Treasury Department, have confirmed OPM's analysis. Further, having 
spoken with experts outside the government as well, I have become 
satisfied that this situation represents a rare exception to the rule.
  That is why Senator Carper and I today introduce the Postal Civil 
Service Retirement System Funding Act of 2003. Our bill will correct 
the statutory funding mechanism for the Civil Service Retirement 
System, CSRS. This legislation is necessary to prevent the overpayment 
of retirement contributions by the U.S. Postal Service. Most important, 
this bill directs OPM to determine a new amortization schedule that 
will pay off the Postal Service's existing unfunded CSRS liability of 
$5 billion.
  In addition, the legislation requires that the savings resulting from 
this Act be used to reduce the postal debt in a manner that the 
Secretary of Treasury shall specify. It also expresses the sense of 
Congress that the Postal Service should use these savings to fulfill 
its commitment to hold postal rates unchanged until at least 2006, to 
begin to pay a portion of their massive unfunded health care 
liabilities, and that the savings not be used to pay bonuses to Postal 
Service executives.
  The USPS needs other changes as well, something acknowledged by 
everyone inside and outside the Postal Service. I was pleased that 
President Bush appointed a Commission on the U.S. Postal Service that 
is modeled along the principles outlined in legislation I introduced 
last year. I am hopeful that when the Commission reports this summer, 
it will provide us with a blueprint to ensure that our postal system is 
ready to serve twenty-first century America as ably as it has served us 
in the past. I look forward to receiving the Commission's report and 
any recommendations for legislation it may include.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 380

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Postal Civil Service 
     Retirement System Funding Reform Act of 2003''.

     SEC. 2. CIVIL SERVICE RETIREMENT SYSTEM.

       (a) Definitions.--Section 8331 of title 5, United States 
     Code, is amended--
       (1) in paragraph (17)--
       (A) by striking ``normal cost'' the first place that term 
     appears and inserting ``normal cost percentage''; and
       (B) by inserting ``and standards (using dynamic 
     assumptions)'' after ``practice'';
       (2) by striking paragraph (18) and inserting the following:
       ``(18) `Fund balance'--
       ``(A) means the current net assets of the Fund available 
     for payment of benefits, as determined by the Office in 
     accordance with appropriate accounting standards; and
       ``(B) shall not include any amount attributable to--
       ``(i) the Federal Employees' Retirement System; or
       ``(ii) contributions made under the Federal Employees' 
     Retirement Contribution Temporary Adjustment Act of 1983 by 
     or on behalf of any individual who became subject to the 
     Federal Employees' Retirement System;'';
       (3) in paragraph (27), by striking ``and'' at the end;
       (4) in paragraph (28), by striking the period and inserting 
     ``; and''; and
       (5) by adding at the end the following:
       ``(29) `dynamic assumptions' means economic assumptions 
     that are used in determining actuarial costs and liabilities 
     of a retirement system and in anticipating the effects of 
     long-term future--
       ``(A) investment yields;
       ``(B) increases in rates of basic pay; and
       ``(C) rates of price inflation.''.
       (b) Deductions, Contributions, and Deposits.--Section 8334 
     of title 5, United States Code, is amended by striking the 
     matter following the section heading through paragraph (1) 
     and inserting the following:
       ``(a)(1)(A) The employing agency shall deduct and withhold 
     from the basic pay of an employee, Member, congressional 
     employee, law enforcement officer, firefighter, bankruptcy 
     judge, judge of the United States Court of Appeals for the 
     Armed Forces, United States magistrate judge, Court of 
     Federal Claims judge, member of the Capitol Police, member of 
     the Supreme Court Police, or nuclear materials courier, as 
     the case may be, the percentage of basic pay applicable under 
     subsection (c).
       ``(B)(i) Except in the case of an employee of the United 
     States Postal Service, an equal amount shall be contributed 
     from the appropriation or fund used to pay the employee or, 
     in the case of an elected official, from an appropriation or 
     fund available for payment of other salaries of the same 
     office or establishment. When an employee in the legislative 
     branch is paid by the Chief Administrative Officer of the 
     House of Representatives, the Chief Administrative Officer 
     may pay from the applicable accounts of the House of 
     Representatives the contribution that otherwise would be 
     contributed from the appropriation or fund used to pay the 
     employee.
       ``(ii) In the case of an employee of the United States 
     Postal Service, an amount shall be contributed from the 
     appropriation or fund used to pay the employee equal to the 
     difference between--
       ``(I) the product of--
       ``(aa) the basic pay of that employee; and
       ``(bb) the normal cost percentage applicable to the 
     employee category of that employee under paragraph (1)(A); 
     and
       ``(II) the product of--
       ``(aa) the basic pay of that employee; and
       ``(bb) the percentage applicable to that employee under 
     subsection (c) deducted from basic pay under paragraph 
     (1)(A).''.
       (c) Civil Service Retirement and Disability Fund.--
       (1) In general.--Section 8348 of title 5, United States 
     Code, is amended by striking subsection (h) and inserting the 
     following:
       ``(h)(1)(A) In this subsection, the term `Postal 
     supplemental liability' means the estimated excess, as 
     determined by the Office of Personnel Management, of the 
     difference between--
       ``(i) the actuarial present value of all future benefits 
     payable from the Fund under this subchapter attributable to 
     the service of

[[Page S2365]]

     current or former employees of the United States Postal 
     Service; and
       ``(ii) the sum of--
       ``(I) the actuarial present value of deductions to be 
     withheld from the future basic pay of employees of the United 
     States Postal Service currently subject to this subchapter 
     under section 8334;
       ``(II) the actuarial present value of the future 
     contributions to be made under section 8334 with respect to 
     employees of the United States Postal Service currently 
     subject to this subchapter;
       ``(III) that portion of the Fund balance, as of the date 
     the Postal supplemental liability is determined, attributable 
     to payments to the Fund by the United States Postal Service 
     and employees of the United States Postal Service, including 
     earnings on those payments; and
       ``(IV) any other appropriate amount, as determined by the 
     Office in accordance with generally accepted actuarial 
     practices and principles.
       ``(B)(i) In computing the actuarial present value of future 
     benefits, the Office shall include the full value of benefits 
     attributable to military and volunteer service for United 
     States Postal Service employees first employed after June 30, 
     1971, and a prorated share of the value of benefits 
     attributable to military and volunteer service for United 
     States Postal Service employees first employed before July 1, 
     1971.
       ``(ii) Military service included in the computation under 
     clause (i) shall not be included in computation of the 
     payment required under subsection (g)(2).
       ``(2)(A) Not later than June 30, 2004, the Office of 
     Personnel Management shall determine the Postal supplemental 
     liability, as of September 30, 2003. The Office shall 
     establish an amortization schedule, including a series of 
     equal annual installments commencing September 30, 2004, 
     which provides for the liquidation of such liability by 
     September 30, 2043.
       ``(B) The Office shall redetermine the Postal supplemental 
     liability as of the close of the fiscal year, for each fiscal 
     year beginning after September 30, 2003, through the fiscal 
     year ending September 30, 2038, and shall establish a new 
     amortization schedule, including a series of equal annual 
     installments commencing on September 30 of the subsequent 
     fiscal year, which provides for the liquidation of such 
     liability by September 30, 2043.
       ``(C) The Office shall redetermine the Postal supplemental 
     liability as of the close of the fiscal year for each fiscal 
     year beginning after September 30, 2038, and shall establish 
     a new amortization schedule, including a series of equal 
     annual installments commencing on September 30 of the 
     subsequent fiscal year, which provides for the liquidation of 
     such liability over 5 years.
       ``(D) Amortization schedules established under this 
     paragraph shall be set in accordance with generally accepted 
     actuarial practices and principles, with interest computed at 
     the rate used in the most recent valuation of the Civil 
     Service Retirement System.
       ``(E) The United States Postal Service shall pay the 
     amounts determined under this paragraph for deposit in the 
     Fund, with payments due not later than the date scheduled by 
     the Office.
       ``(3) Notwithstanding any other provision of law, in 
     computing the amount of any payment under any provision other 
     than this subsection that is based upon the amount of the 
     unfunded liability, such payment shall be computed 
     disregarding that portion of the unfunded liability that the 
     Office determines will be liquidated by payments under this 
     subsection.''.
       (2) Technical and conforming amendment.--Section 8334 of 
     title 5, United States Code, is amended by striking 
     subsection (m).
       (d) Other Payments.--
       (1) In general.--Section 7101(c) of the Omnibus Budget 
     Reconciliation Act of 1990 (5 U.S.C. 8348 note; Public Law 
     101-508; 104 Stat. 1388-331) is repealed.
       (2) Effect on prior payments.--The repeal under paragraph 
     (1) shall have no effect on payments made under the repealed 
     provisions before the date of enactment of this Act.

     SEC. 3. DISPOSITION OF SAVINGS ACCRUING TO THE UNITED STATES 
                   POSTAL SERVICE.

       (a) In General.--Savings accruing to the United States 
     Postal Service as a result of the enactment of this Act shall 
     be used to reduce the postal debt to such extent and in such 
     manner as the Secretary of the Treasury shall specify, 
     consistent with succeeding provisions of this section.
       (b) Amounts Saved.--
       (1) In general.--The amounts representing any savings 
     accruing to the Postal Service in any fiscal year as a result 
     of the enactment of this Act shall be computed by the Office 
     of Personnel Management in accordance with paragraph (2).
       (2) Methodology.--Not later than July 31, 2003, for fiscal 
     year 2003, and October 1 of the fiscal year before each 
     fiscal year beginning after September 30, 2003, and before 
     the date specified in paragraph (4), the Office of Personnel 
     Management shall--
       (A) formulate a plan specifically enumerating the methods 
     by which the Office shall make its computations under 
     paragraph (1); and
       (B) submit such plan to the Committee on Government Reform 
     of the House of Representatives and the Committee on 
     Governmental Affairs of the Senate.
       (3) Requirements.--Each such plan shall be formulated in 
     consultation with the Postal Service and shall include the 
     opportunity for the Postal Service to request reconsideration 
     of computations under this subsection, and for the Board of 
     Actuaries of the Civil Service Retirement System to review 
     and make adjustments to such computations, to the same extent 
     and in the same manner as provided under section 8423(c) of 
     title 5, United States Code.
       (4) Duration.--Nothing in this subsection or subsection (a) 
     shall be considered to apply with respect to any fiscal year 
     beginning on or after October 1, 2007.
       (c) Reporting Requirement.--The Postal Service shall 
     include in each report which is rendered under section 2402 
     of title 39, United States Code, and which relates to any 
     period after the date of the enactment of this Act and before 
     the date specified in subsection (b)(4), the amount applied 
     toward reducing the postal debt, and the size of the postal 
     debt before and after the application of subsection (a), 
     during the period covered by such report.
       (d) Postal Debt Defined.--For purposes of this section, the 
     term ``postal debt'' means the outstanding obligations of the 
     Postal Service, as determined under chapter 20 of title 39, 
     United States Code.
       (e) Sense of Congress.--It is the sense of the Congress 
     that--
       (1) the savings accruing to the Postal Service as a result 
     of the enactment of this Act will be sufficient to allow the 
     Postal Service to fulfill its commitment to hold postage 
     rates unchanged until at least 2006;
       (2) because the Postal Service still faces substantial 
     obligations related to postretirement health benefits for its 
     current and former employees, some portion of the savings 
     referred to in paragraph (1) should be used to address those 
     unfunded obligations; and
       (3) none of the savings referred to in paragraph (1) should 
     be used to pay bonuses to Postal Service executives.
       (f) Report Relating to Unfunded Healthcare Costs.--
       (1) In general.--The United States Postal Service shall, by 
     December 31, 2003, in consultation with the General 
     Accounting Office, prepare and submit to the President and 
     the Congress a report describing how the Postal Service 
     proposes to address its obligations relating to unfunded 
     postretirement healthcare costs of current and former postal 
     employees.
       (2) President's commission.--In preparing its report under 
     this subsection, the Postal Service should consider the 
     report of the President's Commission on the United States 
     Postal Service under section 5 of Executive Order 13278 (67 
     Fed. Reg. 76672).
       (3) GAO review and report.--Not later than 30 days after 
     the Postal Service submits its report pursuant to paragraph 
     (1), the General Accounting Office shall prepare and submit a 
     written evaluation of such report to the Committee on 
     Government Reform of the House of Representatives and the 
     Committee on Governmental Affairs of the Senate.
       (g) Determination and Disposition of Surplus.--
       (1) In general.--If, as of the date under paragraph (2), 
     the Office of Personnel Management determines (after 
     consultation with the Postmaster General) that the 
     computation under section 8348(h)(1)(A) of title 5, United 
     States Code, yields a negative amount (hereinafter referred 
     to as a ``surplus'')--
       (A) the Office shall inform the Postmaster General of its 
     determination, including the size of the surplus so 
     determined; and
       (B) the Postmaster General shall submit to the Congress a 
     report describing how the Postal Service proposes that such 
     surplus be used, including a draft of any legislation that 
     might be necessary.
       (2) Determination date.--The date to be used for purposes 
     of paragraph (1) shall be September 30, 2025, or such earlier 
     date as, in the judgment of the Office, is the date by which 
     all postal employees under the Civil Service Retirement 
     System will have retired.

     SEC. 4. EFFECTIVE DATE.

       (a) In General.--This Act shall take effect on the date of 
     enactment of this Act.
       (b) Application.--Section 8334(a)(1)(B)(ii) of title 5, 
     United States Code (as added by section 2(b) of this Act), 
     shall apply only with respect to pay periods beginning on or 
     after the date of enactment of this Act.

  Mr. CARPER. I am pleased today to be able to join my friend from 
Maine, the chair of the Governmental Affairs Committee, in introducing 
the Postal Civil Service Retirement System Funding Reform Act of 2003. 
This bill is of vital interest to the future of the Postal Service and 
enjoys the strong support of postal management, postal employees and 
postal customers.
  According to OPM and GAO, the Postal Service will significantly 
overfund its obligations to its employees enrolled in the Civil Service 
Retirement System if it continues paying at the current rate. The 
Reform Act addresses this by reducing the amount of money the Postal 
Service is required to pay into CSRS each year to reflect a more 
accurate estimate of its obligations that has been prepared by OPM. In 
the current fiscal year, this will reduce the Postal Service's annual 
CSRS

[[Page S2366]]

payment by nearly $3 billion. These savings, and savings of similar 
size projected for future years, will be used to retire a portion of 
the Postal Service's $11.1 billion debt to Treasury. The Postal Service 
had previously only been able to budget $800 million for debt reduction 
this fiscal year.
  Most importantly, the savings the Postal Service will enjoy if the 
Reform Act becomes law will allow it to hold the price of postage 
steady until at least 2006. This is important because, while what the 
Postal Service charges for its services is still a bargain when 
compared to the prices charged by most foreign posts, postal customers 
have absorbed multiple rate increases in recent months that have raised 
the price of postage by more than the rate of inflation. At a time when 
the economy is weak and modes of communication like e-mail and 
electronic bill pay are more popular than ever, another rate increase 
this year could be a disaster for the Postal Service. If the price of 
postage goes up again in 2004, as I expect it to if the Reform Act is 
not enacted, the Postal Service will likely lose a good deal of 
business. Companies will be more aggressive in encouraging their 
customers to communicate with them online. Large mailers will reduce 
volume and let workers go. Everyday users of the mail will be forced to 
bear another large spike in the price of a first-class stamp. All of 
this would come at a time when the Postal Service is predicting an 
increase in volume for the first time in quite a while. The Reform Act 
will keep mail in the system and give mailers the opportunity to 
increase the amount of business they do with the Postal Service.
  The Reform Act, however, does not remove the Postal Service's 
obligation to continue on the modernization program begun under 
Postmaster General Jack Potter. General Potter came on the job at a 
difficult time for the Postal Service but has led them in a successful 
effort to streamline operations, taking billions of dollars in costs 
out of the system without hurting service. That process needs to 
continue.
  The Reform Act also does not eliminate the need for the Postal 
Service to deal with the future cost of retiree health benefits. These 
costs are estimated at about $50 billion. The Postal Service funds them 
now on a pay-as-you-go basis, meaning they are not reflected in the 
price of postage today. If not addressed soon, these costs will be 
pushed on to future ratepayers, forcing the Postal Service to begin 
raising rates dramatically once the baby boom generation begins to 
retire. Some of the savings the Postal Service will enjoy if the Reform 
Act becomes law should be used to prevent this from happening.
  Finally, the Reform Act does not remove Congress's obligation to 
enact postal reform legislation this year that will help the Postal 
Service and General Potter continue the transformation necessary to 
make the Postal Service viable in the electronic age. President Bush's 
Commission on the United States Postal Service will release a set of 
postal reform proposals this summer that I hope will offer some fair, 
balanced recommendations that we can use to begin drafting legislation. 
I plan to put forward a proposal of my own this year that maintains 
universal service and current delivery standards while giving the 
Postal Service the kind of flexibility its private sector competitors 
have to set prices and cut costs. I look forward to working with 
Chairman Collins and all of my colleagues on the Governmental Affairs 
Committee in getting a postal reform bill signed into law during the 
108th Congress.
  In closing, I would like to briefly address some of the similarities 
between the Reform Act and the Managerial Flexibility Act President 
Bush proposed during the 107th Congress and make an important 
distinction between the two proposals. Like the Managerial Flexibility 
Act would have done for all Federal agencies, the Reform Act makes the 
Postal Service responsible for benefits due to its CSRS enrollees as a 
result of prior military service and amortizes its unfunded CSRS 
obligations over a period of 40 years. The Managerial Flexibility Act 
also would have required Federal agencies to begin funding their 
retiree health benefits on a cost accrual basis, something the Postal 
Service should be able to do if the Reform Act becomes law and it 
begins to see some savings. This kind of accounting makes sense in the 
case of the Postal Service, which by law must be self-sufficient and 
must pay its employees' pension and health costs through the price of 
postage. The utility of requiring all Federal agencies to account for 
their employees' retirement costs in this way is not clear to me. As 
CBO points out in its January 23rd evaluation of the version of the 
Reform Act proposed by OPM late last year, recognizing the accrual cost 
of agency retirement benefits by mandating payments between agencies 
and the Treasury does not provide the government with the resources 
necessary to make future payments when they come due and does not 
lessen the burden on future taxpayers to pay them. In the case of the 
Postal Service, however, the kind of accounting contained in the 
Managerial Flexibility Act will give postal customers, who must plan 
how much they mail in future years based on how much they anticipate 
postage will cost, a more realistic idea of what the Postal Service's 
future costs of doing business will be.
  If the Reform Act is not enacted before April 1st, the Postal Service 
will need to assume that they will be required to make the large CSRS 
payment required of them under current law, forcing them to file the 
rate case they have been preparing. This will force mailers to begin 
litigating the case, meaning they will begin spending resources paying 
lawyers instead using the mail. I call on my colleagues to act quickly 
on the Reform Act to prevent this from happening.
                                 ______