Congress can fix the Postal Service’s financial problems
Wednesday’s announcement that the United States Postal Service would halt Saturday delivery to help fix its financial mess sounded like a good move for the deficit-laden agency. After all, Postmaster General Patrick Donahoe says it will save the post office $2 billion a year.
But put in the context of $20 billion projected annual deficits, that $2 billion savings starts to look a lot less substantial.
A number of factors are behind the post office’s deficit problems: More of us use e-mail and text messaging to stay in touch, driving down mail volume; private competition from carriers like UPS and FedEx has chipped away at the Post Office’s package delivery service business; and USPS processing and distribution facilities have long been considered bloated and inefficient compared to private shippers. But the biggest obstacle to postal reform, by far, is the problem of funding Congressionally mandated pre-retiree health benefits.
Since 2006, the Post Office has been legally required to pre-fund health benefits for future retirees at a cost of around $5.5 billion a year. For the first time last year, it defaulted on its annual payment.
When Congress imposed those mandates in 2006, the Post Office was doing just fine. Digital communication had yet to take such a huge bite out of the amount of mail the USPS processed and delivered. First-class mail volume was about 97 billion pieces in 2006. So there wasn’t much of a backlash when Congress decided that the Post Office was healthy enough to lock in health benefits for future retirees — for the next 75 years, mind you, something no other public or private agency does.
Two years later, the U.S. was hit by the Great Recession at around the same time that mobile communication and things like online bill payments were growing at explosive rates. The Post Office began reporting massive deficits from which it has yet to recover. Last year it delivered only 68 billion pieces of mail.
So far the Post Office has placed about $44 billion in that pre-retiree account. Without the mandate, the Post Office’s financials — while still not completely healthy — would be much more stable.
In a sense, the problems facing the Post Office are a microcosm of what’s happening with retiree benefits in the U.S. more generally. As a nation, we’ve promised benefits to retirees that either we can’t afford or aren’t willing to fully fund.
On Wednesday, Donahoe did mention the billions that the postal service is required to set aside each year, saying that the proposal to drop Saturday delivery is only part of a long-term plan to get the agency back in the black. While Donahoe believes he can change postal delivery schedules without Congressional approval, restructuring the pre-retiree health fund is a different matter altogether.
If the proposal moves forward and Congress allows the post office to go to 5-day rather than 6-day delivery, expect Saturday delivery to stop in August — and you can largely thank that Congressional mandate for your empty mailbox.
Read more: Post Office’s Real Fiscal Problem: Pre-Retiree Health Benefits | TIME.com http://business.time.com/2013/02/07/how-healthcare-expenses-cost-us-saturday-postal-delivery/#ixzz2saoyLCLG
Congress’s war on the post office
The Postal Service faces a threat greater than email or economics: Politics
After a stopgap measure last year, Congress will once again debate whether the United States Postal Service as we know it can survive. The better question is: Will Congress let it?
The U.S. Postal Service is at risk of defaulting on healthcare obligations or exceeding its debt limit by the end of the year. Last month, USPS management unveiled a “Path to Profitability” that would eliminate over a hundred thousand jobs, end Saturday service and loosen overnight delivery guarantees. The Postal Service also proposes to shutter thousands of post offices. “Under the existing laws, the overall financial situation for the Postal Service is poor,” says CFO Joe Corbett. Republicans have been more dire, and none more so than Oversight Committee Chairman Darrell Issa, who warned of a “crisis that is bringing USPS to the brink of collapse.”
Listening to Issa, you’d never know that the post office’s immediate crisis is largely of Congress’s own making. Conservatives aren’t wrong to say that the shift toward electronic mail – what USPS calls “e-diversion” – poses a challenge for the Postal Service’s business model. (The recent drop-off in mail is also a consequence of the recession-induced drop in advertising.)
But even so, in the first quarter of this fiscal year, the post office would have made an operational profit, if not for a 75-year healthcare “pre-funding” mandate that applies to no other public or private institution in the United States.
Warren Gunnels, aide to Sen. Bernie Sanders, calls that mandate “the poison pill that has hammered the Postal Service … over 80 percent of the Postal Service deficit since that was enacted was entirely due to the pre-funding requirement.”
This death hug was part of the Postal Accountability and Enhancement Act, which was passed on a voice vote by a lame duck Republican Congress in 2006. As I’ve reported, the mandate required the Postal Service, over 10 years, to pre-fund healthcare benefits for the next 75. This unique burden costs USPS $5.5 billion a year. The new law also restricted the Postal Service’s ability to raise postage rates, or to provide “nonpostal services” that, in an e-diversion era, could be key to its future. American Postal Workers Union president Cliff Guffey says the bill was designed “by those people who hate government … to destroy the Postal Service. And that’s what they did.”
The Postal Service has long been required to provide “universal service”: delivering to all 151 million addresses in the United States. Conservatives promise that private companies could serve the Postal Service’s function more efficiently, but when it’s their money on the line, the private companies themselves aren’t always so sure. Some of the packages sent through UPS or FedEx are actually delivered by the Postal Service, because those companies save money by contracting with USPS to serve more remote customers.
The Postal Service fulfills its mandate without direct government funding. Faced with right-wing warnings about bailouts, the postal worker union this week is running a new round of TV ads reminding taxpayers that USPS is funded entirely by fees, not taxes. Guffey says the union — the largest of four representing post office workers — will likely hold rallies on next month’s Tax Day to drive home the same point.
Issa and other Republicans have been insisting for years that to stay solvent, USPS needs to make big cuts. In 2010, Issa told the postmaster general at a congressional hearing that the Postal Service has “more or less a third more people than you need. He warned in an Op-Ed that “Allowing USPS to postpone billions in obligations just makes a bailout easier.” In a December Op-Ed, Issa compared continuing Saturday mail service to “asking us to revive the Pony Express.”
Instead, Issa proposes creating a new board that, in the event of default on pre-funding or any other Postal Service obligation, would be empowered to override union contracts and managerial decisions for years.
Elijah Cummings, the Oversight Committee’s ranking Democrat, says for union members who just ratified a contract last year, that would be “a slap in their face … particularly when you have unions who have worked very hard and in a very cooperative manner to help to right-size the Postal Service employee force.”
Cummings also voices concern over USPS management’s proposed cuts to jobs and services. While agreeing reductions are necessary, he says, “I don’t think they would do it with the compassion that I would.” As for ending Saturday service and changing the overnight guarantee, Cummings warns, “We have to be careful that we don’t do things that push even more people away from using the postal service.” Corbett acknowledges that such changes will cost customers, but says that after factoring in such losses, USPS projections show it will still save billions of dollars. “It only makes sense,” says Corbett. “Any financial enterprise would do it.”
Twenty-six Senate Democrats, plus Sanders, have signed a letter raising similar concerns about service cuts and calling for an alternative approach: ending the pre-funding mandate, allowing the Postal Service a refund on billions in overpayments to pension funds, and allowing and encouraging USPS to diversify its services. In a TV interview last month, Sanders suggested that diversification could include shipping alcohol and providing notary and licensing services. (Last year, USPS commissioned a report from Accenture that examined diversification strategies in other countries and estimated that such an approach could have brought USPS $74 billion from 2003 to 2008.) By contrast, Sanders warned that the USPS management’s proposed cuts would mean “a death spiral” as customers are driven elsewhere.
Sanders is among the backers of the Postal Service Protection Act, whose recommendations are similar to the ones in the senators’ letter. Guffey says the most promising route to an acceptable compromise would be for these recommendations to be incorporated into a tri-partisan bill introduced by Sens. Joe Lieberman, Tom Carper, Susan Collins and Scott Brown.
Among USPS management’s proposed changes are a transformation of workers’ healthcare plans and the elimination of at least 155,000 jobs. USPS has already eliminated 130,00 full-time equivalent positions in the past three years. In a union contract signed in May 2011, APWU agreed to concessions in order to preserve its “no-layoff” clause; Guffey says that the Post Office’s projections, designed to make the case for further sacrifices from workers, fail to factor in savings from the concessions they’ve already agreed to. Union leaders expressed surprise last year when, within three months after signing the new contract with APWU, USPS issued white papers in support of congressional proposals to override those layoff protections. But Corbett says he believes the reduction can be accomplished through voluntary incentives.
Cutting those jobs would mean further reductions in public sector employment, including among veterans and African-Americans, who for decades have been over-represented in Postal Service ranks. “It just doesn’t seem like it’s the right time to go after veterans and their employment,” says Guffey. He wants Congress to maintain current delivery standards, which he says would save many post offices from closure.
Cuts have intangible costs as well. Interviewed for a Washington Post profile of the endangered post office in Star Tannery, Va., one resident said, “Closing the post office would be one step toward eradicating small-town life in America.”
True to form, President Obama falls between Sanders and Issa: He would scale back the pre-funding requirement and allow postage rates to rise, but would also back the elimination of Saturday service. In an emailed statement, White House spokesperson Matt Lehrich wrote, “The President proposed a balanced plan that would return USPS to financial viability while saving taxpayers money, and Congressional action that enacts this type of balanced plan is necessary.”
A Manufactured ‘Crisis’: Congress Can Let The Post Office Save Itself Without Mass Layoffs Or Service Reductions
Both the news media and a number of politicians have claimed recently that the U.S. Postal Service (USPS) is in “crisis,” and that it is necessary to lay off thousands of workers or reduce service in order to make the post office fiscally stable. And the Post Office itself has proposed laying off as many as 120,000 employees and withdrawing from federal health care plans in order to navigate upcoming fiscal crunches.
It is true that USPS is facing fiscal challenges — it lost nearly $20 billion over the last four years and is at risk of not being able to meet a $5.5 billion mandated payment to the Treasury at the end of this month (which has been put off six weeks thanks to the last continuing resolution in Congress).
But what has been lost in the political debate over the Post Office is why it is losing this money. Major media coverage points to the rise of email or Internet services and the inefficiency of the post model as the major culprits. While these factors may cause some fiscal pain, almost all of the postal service’s losses over the last four years can be traced back to a single, artificial restriction forced onto the Post Office by the Republican-led Congress in 2006.
At the very end of that year, Congress passed the Postal Accountability and Enhancement Act of 2006 (PAEA). Under PAEA, USPS was forced to “prefund its future health care benefit payments to retirees for the next 75 years in an astonishing ten-year time span” — meaning that it had to put aside billions of dollars to pay for the health benefits of employees it hasn’t even hired yet, something “that no other government or private corporation is required to do.”
As consumer advocate Ralph Nader noted, if PAEA was never enacted, USPS would actually be facing a $1.5 billion surplus today:
By June 2011, the USPS saw a total net deficit of $19.5 billion, $12.7 billion of which was borrowed money from Treasury (leaving just $2.3 billion left until the USPS hits its statutory borrowing limit of $15 billion). This $19.5 billion deficit almost exactly matches the $20.95 billion the USPS made in prepayments to the fund for future retiree health care benefits by June 2011. If the prepayments required under PAEA were never enacted into law, the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion.
In order to remedy this problem, Rep. Stephen Lynch (D-MA) has introduced bipartisan legislation (which has 193 co-sponsors) that would allow the USPS to spend more of its own money to pay down its deficits, including $6.9 billion in pension overpayments or other overpayments that may total as much as $25 billion to $50 billion. These are Post Office funds, not taxpayer dollars.
Meanwhile, Rep. Darrell Issa (R-CA) has been pushing for legislation that would lead to widespread layoffs and break the back of the postal workers’ unions to defuse the “crisis” that Congress created.
We had a great Post/Article on this subject posted on Feb. 02 2012.
But like so many other Posts we have, when it goes against what the “media” is pushing, it just up and disappeared from our archives.
All that remains are the pictures in our Media Photo Gallery. The Post is gone. We were able to check the exact ‘post date’ in our Post Archives. Nothing. Wiped clean.
Must mean we are on to something.
This is part of the War against Our U.S. Constitution!
The Huff Post does ‘Hit Pieces’ against the U.S. Post Office all the time. Now they are being joined by the Alternative Media.
This is a Media Saturation Event against the U.S. Postal Service. One Message, many sources.