Unless Congress acts to fix a massive financial crisis it created, the U.S. Postal Service (USPS) will default on a $5.5 billion pension payment to the U.S. Treasury due on August 1, as well as another $5.6 billion payment due on September 30. The USPS has less than $1 billion cash on hand. Ironically, the USPS Inspector General’s office issued a report in June showing that the Postal Service has overpaid its pension obligations by $13.1 billion, but the Treasury cannot refund the money or even credit the agency for it.

 

An independent branch of the federal government responsible for providing mail delivery service in the U.S., the USPS is required to cover its $70 billion annual expenses without help from the federal government. It receives only 0.14% of its annual budget from taxpayers, and that is only to reimburse agency for the costs of providing free mailing privileges to blind persons and overseas voters.

 

Although declining amounts of mail have caused its costs to slightly exceed its revenues, most of its financial problems can be traced to the Postal Accountability and Enhancement Act (PAEA). Adopted by a Republican-dominated Congress in 2006, PAEA forces the USPS to spend $103.7 billion by 2016 to the Retirees Health Benefits Fund (RHBF) that will pay for future health benefits of retirees for the next 75 years. In other words, the Postal Service was ordered to pay for the benefits of workers it hasn’t even hired yet and do it in a much-accelerated time frame.

 

The losses started after passage of PAEA, for USPS was actually profitable from 2004 through 2006, but then lost $25.4 billion between 2007 and 2011. In the first half of 2012, USPS had an operating loss of $6.4 billion, 95.3% of which ($6.1 billion) was for payments due to the RHBF in 2012. Along the way, the ability of USPS to absorb operating losses has been diminished. Since 2005, USPS debt has risen from 0 to $13 billion, only $2 billion below its maximum statutory borrowing authority.

 

Despite reducing its workforce by 21.9% since 2006 and increasing productivity, USPS has warned that without a congressional fix, it will soon have to abolish Saturday mail delivery, close hundreds of local post offices and other facilities, and make other service cutbacks.

 

At present there are two bills before Congress that offer sharply contrasting approaches to fixing the problem. H.R. 1351 (the USPS Pension Obligation and Recalculation Act) would credit USPS for its overpayments and allow the agency to spend more of its own money to pay down its deficits, while still paying nearly $7 billion toward pensions and other costs. Although this bill has 230 House co-sponsors—a majority of the 435 House members—it is being blocked by Rep. Darrell Issa (R-California), who is chair of the House Oversight and Government Reform Committee, which has jurisdiction over USPS related matters.

 

Issa prefers his own legislation, H.R. 2309, which would require the closing of hundreds of post offices, renegotiation of union contracts, and reduced delivery days. Issa, whose bill has only one co-sponsor, has accepted more than $35,000 in contributions from PACs and individuals associated with USPS competitor United Parcel Service.

-Matt Bewig

 

To Learn More:

Congress’ Failure Pushes USPS to Brink of Default (American Postal Workers Union)

U.S. Postal Service: Background and Analysis of H.R. 2309 and S. 1789 in the 112th Congress (by Kevin R. Kosar, Congressional Research Service)

The One Thing Your Congressional Rep Can Do to Save the USPS (by Bill Brickley, New Hampshire Labor News)