The Postal Service is once again in the news, and much of the news, especially on cable TV, tells the wrong story.
The Postal Service is nearly bankrupt the story on TV goes, mostly due to “high labor costs” and declining mail volume. Well, although it’s not easy to communicate in a 30-second cable news segment, the truth is that the USPS budget problems are mostly due to, what else, Congress.
It is certainly true that mail volume has declined about 20% since 2006, much of the decline hitting the more profitable First-Class Mail®, caused by the email and online revolution.
And it is also true that the Great Recession and the ongoing weak economy has hurt the Postal Service. True, too, is the fact that the Postal Service will have a $9 billion budget shortfall this fiscal year, and it will not have enough money to meet all of its obligations, as it fast approaches its $15 billion debt limit, which was authorized in 1970.
But the point is that its largest obligation shouldn’t be one of its obligations at all.
A 2006 law, passed in the heady days of Republican dominance, forced the Postal Service to pre-fund 75 years of future—future—retiree health benefits to the tune of 10 annual payments of $5.5 billion. Congress did this over objections from USPS and its unions.
Think about that. The law requires the Postal Service to fund retirement benefits for employees who haven’t even been born yet! No other agency in the federal government—including Congress itself—has such an onerous obligation. And most American private companies, to the extent they provide them, don’t even bother to pre-fund health benefits for retirees at all.
As the postal unions have demonstrated—and USPS management does not dispute it—if this one obligation were eliminated, the Postal Service would have actually realized a small profit since 2007. You read that correctly. A profit.
Here is how The Washington Post reported it:
“The last four years’ reported losses can all be attributed to this prefunding and then some,” Fredric V. Rolando, president of the National Association of Letter Carriers, said in an interview.
He is correct.
According to the USPS white papers, from 2007 to 2010, mail volume declined 20 percent while postage remained capped at the rate of inflation, “resulting in net losses over the period of just over $20 billion, including a loss in FY2010 of $8.5 billion.”
During that period, the prefunding of retiree health benefits cost $21 billion. Without that congressional mandate, the USPS would have cleared $611 million.
“The USPS would have cleared $611 million.” Have you heard that on TV?
Lest you think that future retirees would be in danger of losing benefits, don’t worry. The Postal Service Retiree Health Benefit Fund has $42 billion sitting in it right now, which is enough to pay insurance premiums for retirees for 20 years. Surely the Great Recession will be over before then?
Predictably, USPS management has seized the opportunity to go Tea Party-crazy and appeal to the anti-union sentiment that exists among most Republican lawmakers.
Postmaster General Patrick Donahoe, besides wanting to take the service out of the Postal Service and cut 220,000 jobs, is asking Congress to use its power to strip a negotiated no-layoff clause from union contracts—achieved through collective bargaining—and to give him permission to withdraw all postal employees from the Federal Employee Health Benefits Program (FEHB) and place them in, as The Washington Post put it, a “less generous” program.
Ironically, Paul Ryan’s infamous kill-Medicare budget plan was sold to the public as a plan based on the FEHB, which covers all federal employees including Congress. Not only was that Republican claim a falsehood and a ruse to reduce benefits and shift costs to future seniors, now we find out that the Postal Service is begging Congress to boot 563,000 current postal employees from the very system that Republicans held up as a paragon of health coverage virtue.
Cliff Guffey, president of the American Postal Workers Union, the Post reports, called Donahoe’s scheme, “outrageous, illegal, and despicable.” Unfortunately for postal workers, the chairman of the Senate committee in front of which Donahoe will testify today is the retiring Joe Lieberman, who says he has an “open mind” on the USPS proposals.
The last time the ex-Democrat had an open mind he urged us to put Tea Party-convert John McCain in the White House.
Finally, in addition to at least temporarily suspending the pre-funding obligation, postal unions and other groups have advanced another solution. Two independent audits conducted by Hay Group and The Segal Company have found that the Postal Service has grossly overpaid the Civil Service Retirement System (CSRS), which covers employees hired before 1984. The USPS Inspector General estimates that USPS has overpaid by a mind-boggling $75 billion since 1971.
♦ Using that $75 billion to pay off the current unfunded liability in the CSRS (about $10 billion)
♦ Paying off the Postal Service’s current debt ($15 billion)
♦ Adding the remainder ($50 billion) to the current balance in the future retirees health benefit fund ($42 billion)
♦ Voilà, there is enough to cover the almost $90 billion in obligations to those future retirees.
That solution is not one that neatly fits into a cable news segment, but it is a solution that would save the Postal Service from cutting services and going postal on postal workers.