Cost Estimate Of H.R. 756 – The Postal Service Reform Act of 2017 – Congressional Budget Office

6/1/17 – H.R. 756 would change the laws that govern the operation of the Postal Service (USPS), restructure how the federal government pays for health benefits for federal employees and annuitants, and alter how the federal government calculates the contributions that agencies make for retirement benefits. Major provisions of the bill would:

  • Permit the Postal Service to raise rates on certain mail categories (direct spending savings of $8.6 billion);
  • Authorize the Postal Service to phase out delivery of mail directly to business customers’ doors (direct spending savings of $2.0 billion);
  • Establish a new health benefits program for Postal Service employees, annuitants, and their dependents (net direct spending costs of $4.5 billion and discretionary savings of $1.9 billion); and
  • Require the use of demographic data specific to Postal Service employees for the calculation of certain retirement benefits, (net direct spending costs of $0.1 billion, and discretionary costs of $1.5 billion).(1)

Effects on the Federal Budget

CBO estimates that enacting H.R. 756 would reduce direct spending by about $6 billion over the 2017-2027 period; therefore, pay-as-you-go procedures apply. Enacting H.R. 756 would not affect revenues.

The total changes in direct spending over the 2017-2027 period are split between net off-budget savings of about $6.2 billion and net on-budget costs of about $0.2 billion. (USPS cash flows are recorded in the federal budget in the Postal Service Fund and are classified as off-budget, while the cash flows of the other accounts affected by H.R. 756 are classified as on-budget.)

In addition, CBO estimates that implementing H.R. 756 would lead to discretionary savings of $0.3 billion over the next 10 years, subject to appropriation actions consistent with that estimate.

CBO estimates that enacting the legislation would not increase net direct spending or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2028.

Effects on State, Local, and Tribal Governments, and on the Private Sector

By increasing postal rates for public and private entities, H.R. 756 would impose intergovernmental and private sector mandates, as defined in the Unfunded Mandates Reform Act (UMRA), on public and private entities that send certain mail through the Postal Service. Additionally, the bill would impose a private-sector mandate on some postal annuitants by requiring them to enroll in Medicare, if eligible. CBO estimates that the annual cost to public entities of increasing the postal rates would exceed the threshold established in UMRA for intergovernmental mandates ($78 million in 2017, adjusted annually for inflation) in each of the first five years after the rates become effective. CBO also estimates the aggregate annual cost to private entities of complying with the mandates would exceed the threshold established in UMRA for private-sector mandates ($156 million in 2017, adjusted annually for inflation) in each of the first five years the mandates were effective.

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  1. This estimate reflects a notice of proposed rulemaking published by the office of Personnel Management in December 2016 to use demographic data specific to Postal Service employees to calculate certain retirement benefits. If that rule is finalized before enactment, this provision would have no cost.

STATEMENT OF APWU

Postal Reform Scored by Congressional Budget Office
Reports a Positive Financial Impact of H.R. 756 on Federal Budget

APWU – 06/02/2017 – Yesterday, the Congressional Budget Office (CBO) published its report on Postal Service Reform Act of 2017 (H.R. 756). It is standard practice for the CBO to “score” pending legislation introduced into Congress in order to report its impact on the federal budget. They estimate that H.R. 756 would result in a savings of $6.2 billion over the next ten years.

These savings are technically “off-budget” because the USPS’ cash flow is recorded in the federal budget (in the Postal Service Fund) is classified as “off-budget.” The cash flow for the Postal Service Retirement Health Benefit Fund (PSRHBF) is classified as “on-budget.” The net “on-budget” cost of the legislation is only $0.2 billion.

“The score for H.R.756 has improved since the last version of the bill in the 114th Congress,” said Legislative and Political Director Judy Beard. “We are encouraged by the positive changes that have been made in the legislation and will seek continued improvements as the bill moves forward.”

The bill is now off to two House of Representatives’ committees: Ways & Means, chaired by Kevin Brady (R–TX-8) with ranking member Richard Neal (D-MA-1) and Energy & Commerce, chaired by Fred Upton (R-MI-6) with ranking member Bobby Rush (D-IL-2).

In both committees the bill must be approved in order to be voted on by the full House of Representatives. Then the legislation will move to the Senate for a similar process.

The APWU continues to support H.R. 756 in its present form and is working with legislators to make improvements. This legislation is crucial to ensuring a robust future for America’s public Postal Service.


STATEMENT OF UNITED POSTMASTERS and MANAGERS of AMERICA

Congressional Budget Office Projects HR 756 Saves $6 Billion
Posted by Bob Levi on 06/02/17

Yesterday, the Congressional Budget Office (CBO) finally released the projected cost associated with enactment of HR 756, the Postal Reform Act of 2017. The CBO determined that the bill would reduce federal spending by $6 billion over the next decade.

On March 16, the House Committee on Oversight and Government Reform approved HR 756 by voice vote. The CBO estimate is a prerequisite for a vote by the House of Representatives, and is an essential step for consideration by the House Ways and Means Committee and the House Energy and Commerce Committee. The legislation was referred to these two committees, since a provision in the bill impacts the Medicare program and the panels have jurisdiction over the program.

The major budget effects of HR 756 are as follows: The partial restoration of the exigent postage rate would increase postal revenue by $8.6 billion; the phase-out of door delivery for business mail would save $2 billion; and the creation of a postal health plan within the FEHBP, combined with Medicare integration, would increase spending by $4.5 billion. Consequently, there is a net 10-year savings of $6 billion.

Additional revenue could accrue to the Postal Service as the result of providing services on behalf of state, local and tribal governments, and from changes in the manner that the USPS contracts with private entities. Moreover, modest USPS savings would result from using postal-specific data for calculating certain retirement liabilities.

Medicare integration, a consequential element of HR 756, would result in USPS savings of $4.7 billion. However, since Medicare will become the primary insurer for all Medicare-eligible annuitants, Medicare costs would grow by $10.7 billion — this includes Medicare Part B coverage and providing the USPS with a prescription drug subsidy. Interestingly, USPS Medicare integration would reduce non-postal FEHBP premiums by $3.3 billion.

Finally, CBO projects that the financial relief provided by the bill would enable the agency to resume modest investment in infrastructure and operations.

7 Responses to "Cost Estimate Of H.R. 756 – The Postal Service Reform Act of 2017 – Congressional Budget Office"

  1. Postal Joe   June 3, 2017 at 4:58 pm

    This whole report (Medicare integration) comes down to the USPS saving $4.7 Billion at a cost of $10.7 Billion to Medicare!! I don’t know about you but that adds up to a NET LOSS of $6 billion!!! This must be the “voodoo economics” that the Government uses from time to time!! This is basically a bailout of the Postal Service courtesy of the Medicare Program and H.R. 756 should be thrown out because the CBO should have given it a negative score because it amounts to a loss not a gain!!!

    As usual Postaljoe – great post. It just does not make any sense at all. rick@PEN

  2. ididnotvoteforthatguy   June 4, 2017 at 4:04 pm

    @Postal Joe, good one – but Not “voodoo economics.” You’re subtracting the USPS $4.7 billion Medicare savings from the total federal Medicare cost ($10.7 billion), but forget to account for the rest of the overall “on budget” Government savings. If you add up all the federal budget reductions, then you notice the increased costs to Medicare are all but eliminated. The $6 billion you’re missing from your picture comes from on-budget reductions such as savings from Premiums for USPS Annuitants (- $2.54 billion) plus Premiums for Non-Postal Annuitants reductions (- $1.44 billion) plus FEHB Premiums for Non-Postal Annuitants (- $1.89 billion). Add those Government savings and the $6 billion “voodoo” disappears – and the CBO scoring starts making some sense. But I do support that current postal retirees should continue to have a choice whether or not to participate in the Medicare program. On the other hand, Trump’s budget proposal will be a lot more damaging for (postal employees and retirees) than HR 756.

  3. Postal Joe   June 6, 2017 at 9:38 am

    As previously stated my first comment had to do with the (Medicare Integration ) “only” part of this bill… and for that matter this bill exist only because of the Medicare integration, everything else is just “fluff” to take attention and costs away from the main subject of the bill. If one spends $10.7 Billion to save $4.7 Billion that’s a $6 Billion loss…read the last two paragraphs of the article!
    Furthermore, I would not under estimate the effects of H.R. 756, this will forever change our health insurance as we know it today!! I wouldn’t put too much faith in the Q and A that the APWU had out awhile ago and here’s why…we all know what Medicare is and how it works, (it’s been around awhile)! The proposed Postal FEHB is just that, it’s “proposed”, it’s never been done before ! So to come out and give all these answers about how it will work and the costs associated with it has to be taken as “possible answers” because like I said it’s never been done!!
    If you’ve read the news lately, they are proposing privatizing the Air Traffic Controllers! The USPS could be next…maybe that’s why they are trying to integrate us into Medicare??

    Please call your Reps in Washington and tell them not to back HR 756!!

  4. ididnotvoteforthatguy   June 7, 2017 at 10:53 pm

    @Postal Joe, please note that the CBO evaluated the “overall” fiscal impact on the federal budget and not just the slice you’re fixated on. The Medicare incurred expenses was “only” a part of that evaluation. The $6 billion you claim as a “loss” does not consider other “healthcare” cost reductions (aka savings to the Government).The integration of postal annuitants into Medicare is not such a bad idea – especially when considering we are paying into Medicare already. There is a good reason why 80%+ current postal retirees voluntarily “choose” to pay an additional $134 for Medicare coverage. While Medicare becomes the primary payer, your healthcare Plan covers all the other out-of-pocket expenses. For some 65-years-olds, the $134 expense is a not only a good health insurance benefit … but also peace of mind. Current retirees who oppose the involuntary integration into Medicare should call their Reps in Washington and advocate for an amendment to the bill allowing them to continue having that option. But please don’t suggest the whole HR 756 should be thrown based on some “voodoo economics”. On the other hand, Trump’s budget proposal should be DOA because it cuts $47 billion in postal retirement benefits and operational cuts and absolutely 0 benefits (to current and future retirees). Now, that’s something that should be thrown into the garbage. Medicare integration is a “benefit” … Trump’s cuts are just that. Maybe you should call your Rep about that. I know I am!

    In my opinion if forcing medicare coverage on a retiree (any number of retirees) will put him/her/them into financial distress then it is absolutely wrong. For example – I retired in 2007. I am 67. I have not signed up for SS or Medicare just yet…I maintain my FEHB B/C coverage for myself and my wife. My wife retired early last year…she IS NOT eligible for medicare coverage…I MUST keep my FEHB plan to cover her. If I am forced into Medicare then I will be FORCED to pay an additional $134.00 every month, or more, in addition to the $500.00+ I pay now for my FEHB B/C. My postal retirement is already low…don’t bite into it again unless I TELL THEM TO DO IT…not THEY tell me it will happen.

    Continuing my FEHB coverage was a benefit I was promised when hired and when retiring….DON’T MESS WITH IT. Also, this will add a huge cost to the already overburdened medicare cost. PostalJoe is correct…forcing us into medicare is wrong and should be stripped from H.R. 756. Rick @ PEN

  5. ididnotvoteforthatguy   June 8, 2017 at 10:48 am

    Rick @ PEN, Completely understand your situation and I support existing retirees to continue having the choice to participate in Medicare based on their personal needs. I don’t know how correct @Postal Joe was, but I agree when you say “forcing us into Medicare is wrong and should be stripped from H.R. 756.” Unfortunately, Trump’s budget proposal is far more devastating to postal retirees than HR 756. We’ll have to wait and see how it all plays out.

    I see by your posting name that you’re not a Trump supporter – that is fine. I did vote for President Trump and I support most, I said most, of what he is doing. The budget, as written, will not be passed. The way I see it…if I want to sell my old car and get $5000.00 for it…I ask $7500.00 for it and then negotiate the final selling price. That is how I see any budget proposal.

  6. ididnotvoteforthatguy   June 8, 2017 at 3:02 pm

    Rick @ PEN, Right on, that’s a fair statement … I personally do not support most of what he is doing – but that would be a very long comment :-). I’m sure the budget proposal won’t pass in its current form, but even if Trump gets only 75% of what he’s asking – that would still amount to $35 billion reductions in postal retirees benefits and postal operational cuts. I would lose about $5,000 a year because Trump thinks I should pay more towards the Federal budget. The Government is already robbing the Postal Service, but now Trump wants to vandalize postal employees and retirees. I find that appalling and completely unfair! HR 756 is not what everybody agrees with 100%, but at least it would offer some much-needed reform and fiscal balance for the Postal Service at a much needed time. If Trump gets at least some part of his wish, postal employees & retirees will struggle a lot more compared to HR 756 becoming law. It’s been over 10-years since PAEA became law and Congress failed to fix their own mistakes.

  7. Postal Joe   June 9, 2017 at 8:35 pm

    Thanks for the discussion guys, it’s just too bad more people don’t chime in to debate this, everyone has their opinions and I respect that!! And Rick, I’m in a similar situation as you are with the retirement and healthcare, etc. I had 35 years between the military, VA and the Postal Service! I was hired as a federal employee, served 35 years and retired as a fed retiree I just want what was promised to all fed retirees, period!

    It’s been 10 years since the PAEA law was passed and the prefunding (75 years) of healthcare is the only part of the law people remember!! If PAEA had not passed, the USPS would not be in financial distress as it is today and thus H.R. 756 would not exist (it would not be needed!)

    I consider the healthcare we have now to be a pretty good deal as a retiree, everyone keeps talking about $134 more, well to start off it’s $268 if married and how long do you think the USPS is going to pay for Part D or the EGWP plan! Keep in mind the original postal reform called for retirees having to pay Part B and D, then magically this EGWP plan was added!! This is an expensive plan so you know they’ll try to bail out of paying for that before long! Have you seen the premiums for Plan D lately if you need meds? There are huge increases on the horizon for medicare and most retirees will not be “held harmless” from these increases!!
    So to take a chance on something like health insurance is not for me, you may think it will better than what we have but it could sure be worse!! Just in the last 5 years I remember a guy saying that his plan was going to be cheaper with more choices and that you could KEEP YOR OWN DOCTOR!!! It was call the Affordable Care Act (what a fiasco)!

    Lastly, if this Medicare proposal is such a great deal, how come other Fed retirees (other agencies) aren’t calling their reps in Washington to jump on the “bandwagon” because after all they too have been paying into the Medicare system for the same amount of time the Postal retirees have been? And why do you hear about all these Union Locals that have come out against this bill because of the Medicare mandate? 21cpw has some pretty good stories about locals being silenced by APWU officials?

    The old saying “you don’t know what you have…until you loose it” applies here because if this bill becomes law there is no going back, it’s done!!

    Thanks to all that contributed to the discussion…this is just my 2 cents worth!!!!
    Well said PostalJoe. Rick @ PEN

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