Boehner’s Ploy to End Saturday Postal Delivery to Bailout the Highway Trust Fund

In a memo to the House Republican caucus, Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R–VA), and Majority Whip Kevin McCarthy (R-CA) fully endorsed the idea of ending Saturday postal delivery to bail out the Highway Trust Fund and in essence urged their colleagues to support it in the form of a legislative measure they would eventually plan to bring to the House floor before the August congressional recess, assuming it gains enough support to pass.

By Gary Hoitsma l June 10, 2014

John BoehnerEric CantorKevin McCarthy

The nation’s transportation funding debate just gets curiouser and curiouser. In a surprise move , House Republican leaders let it be known they have decided to back a short-term General Fund transfer into the Highway Trust Fund to extend current programs for about eight months to May 2015. The transfer would be paid for through a controversial postal reform initiative that has already raised protests of opposition from key Senate Democrats. Meanwhile, the plan all but kills any small chance there may have been to find agreement on a longer-term multi-year transportation bill before the election. The news appears to have caught even some House Transportation & Infrastructure (T&I) Committee members by surprise.

How to pay for a simple one-year bailout of the Highway Trust Fund at a cost hovering near $15 billion? That has been the question of the moment for House Republican leaders intent on avoiding a fiscal train wreck this summer that could force highway and transit programs to come to a grinding halt.

And the tentative answer they have come up with is to apply a convoluted accounting measure to a controversial proposed reform of the United States Postal Service (USPS). In rough layman’s formulation, it amounts to allowing a permanent partial end to Saturday mail deliveries and using the ten-year savings from that as the basis from which to help pay for a less-than-one-year bailout of the Highway Trust Fund so as to maintain current transportation spending levels through May 2015. But as curious as that sounds on the surface, it is even more complicated (and seemingly implausible) than that, both practically and politically.

Yet, it is said this postal ploy will be enough to offset – on paper – a one-time $10.7 billion General Fund transfer into the Highway Trust Fund, to which another $1.3 billion would be added through a raid on the Leaking Underground Storage Tank (LUST) Trust Fund, for a total transfer of $12 billion. (The LUST Trust Fund, financed through 0.1 cent per gallon of the 18.4 cents per gallon federal gas tax. In 2012, it was raided for $3 billion to help pay for MAP-21, along with a variety of other raids and dubious tax code changes that included siphoning hundreds of millions of dollars from the Wyoming Abandoned Mine Land Trust Fund. In a memo now to the House Republican caucus, Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R–VA), and Majority Whip Kevin McCarthy (R-CA) fully endorsed the post office-to highway trust fund idea and in essence urged their colleagues to support it in the form of a legislative measure they would eventually plan to bring to the House floor sometime in the next eight weeks before the August congressional recess, assuming it gains enough support to pass.

In all, it was a quite abrupt and stunning turn of events in the continuing drama surrounding the reauthorization of MAP-21 and the more immediate crisis of impending shortfalls in the Highway Trust Fund beginning this summer.

House leaders may have been banking on Congress’ experience with MAP-21 in 2012 during which the ugly details of the “pay-for” ended up being less important to many members than their ability to say that deficit-neutral revenue – short of a tax increase – had been identified and had bipartisan support. Whether this new House GOP plan can gain any bipartisan support still remains to be seen. MAP-21 amounted to a two-year General Fund bailout paid for through a series of complicated tax code changes with revenue scored over 10-years. Now, that bailout is coming up short on the back end of the first two years, setting the stage for the new bailout needed this year by the end of August at the latest.

It is largely for political reasons, rather than statutory requirement, that any General Fund transfer must be “offset” or otherwise deemed to be “paid for” so as not to be scored to add to long term deficits. In this case, the offset “pay for” offered by GOP House leaders is a by-product of a long-sought proposed reform to the USPS.

The Postal “Pay-For”

While the Highway Trust Fund is nearing bankruptcy due to diversions and overspending, the U.S. Postal Service is not exactly itself in very great shape. It suffered a $15.9 billion operating loss in 2012, has been unable in recent years to make required multi-billion-dollar annual payments to pre-fund its retirees’ health care, and faces over $100 billion in long-term unfunded liabilities. And therefore it too will soon be in dire need of its own bailout. Thus the idea that any reform to help the Postal Service save money might accrue to the benefit if the Highway Trust Fund is a bit curious to say the least.

But here is the green-eye-shade accountant’s logic behind what is being proposed: If the Postal Service can be allowed to cut back on Saturday mail deliveries (not eliminate them entirely), then there will be an estimated accrual of $10.7 billion in cost savings over the next ten years, or about $1.07 billion per year in such savings. These cost savings will not be applied to the Highway Trust Fund directly, but instead will go to the Postal Service to allow it operate more efficiently, and in turn incrementally improve the Postal Service’s ability to meet its own obligations. By doing so, this will correspondingly reduce the amount of money that will be needed eventually for a much larger General Fund bailout of the Postal Service.

Thus, it is this envisioned saving – reducing the amount of the virtually inevitable Postal Service bailout by an estimated $10.7 billion over ten years – that is to be applied on paper to pay for an immediate General Fund bailout of the Highway Trust Fund for a period of less than one year.

Postal Politics

The USPS-Highway Trust Fund gambit also comes with very interesting political and policy dynamics.

Advocates of postal service reform in Congress have sought for years to pass legislation to end Saturday mail delivery as a way for the service to save money. But every time they have failed because the advocates of maintaining such deliveries have always proven to be politically stronger. Reform advocates now hope that tying the proposal to the need for a highway bailout will give them greater leverage and more votes to finally get a modified end to Saturday deliveries passed.

Interestingly, the Postal Service is not a federal government agency in the traditional sense, but a quasi-privatized entity whose revenues and expenditures have been deemed by Congress to be “off-budget.” Thus, technically, there can be no direct transfer of USPS savings to the Highway Trust Fund or to any other on-budget federal account. This is part of what forces the accounting that it is the bailout savings under the proposal that would technically be applied to the Highway Trust Fund, not the postal service savings.

Gary Hoitsma served as special assistant to Ray Barnhart during Barnhart’s tenure as Administrator of the Federal Highway Administration, under President Ronald Reagan. Mr. Hoitsma is also a contributor to SFPPR News & Analysis.