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According to recent reports, the Postal Service (USPS) is so low on cash that it will not be able to make a $5.5 billion payment and may have to shut down entirely unless Congress takes emergency action to stabilize its finances. According to Patrick R. Donahoe, the Postmaster General, if Congress doesn’t act, the Postal Service will be in default. In attempting to deal with its critical financial situation, Donahoe has been considering a series of painful cost-cutting measures to erase the agency’s deficit, expected to reach $9.2 billion this fiscal year. These major steps include eliminating Saturday mail delivery, closing almost 3,700 postal locations and eliminating about 120,000 workers despite a no-layoffs clause in the unions’ contracts. Even with significant cost reductions and revenue growth initiatives, current financial projections indicate the Postal Service will have a cash shortfall and will have reached its statutory borrowing limit by the end of this fiscal year. Absent substantial legislative change, the Postal Service will be forced to default on payments to the Federal government.
It’s these payments to the Federal government that have significantly contributed to the Postal Service financial problems. Further compounding the problem however, are the decades of contractual promises made to unionized workers including no-layoff clauses. Labor represents 80 percent of the agency’s expenses when compared to 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.
The Postal Service’s third quarter of fiscal year (FY) 2011 (April 1-June 30) ended with a net loss of $3.1 billion, compared to a net loss of $3.5 billion for the same period in FY 2010. Total mail volume declined to 39.8 billion pieces for the quarter, compared to 40.9 billion pieces in the third quarter of FY 2010. Postal Service third quarter revenue reflects the anemic state of the economy during the past three months. Additionally, the growth in electronic communications continues to erode core First-Class Mail volume. Net losses for the nine months ended June 30 amount to $5.7 billion in 2011 compared to $5.4 billion in 2010.
The Postal Service is an independent agency of the United States government responsible. The Postal Service employs over 574,000 workers and operates over 218,000 vehicles. It is the second-largest employer in the United States after Wal-Mart and the operator of the largest vehicle fleet in the world. Each day the United States Postal Service delivers approximately 660 million pieces of mail to as many as 142 million delivery points.” As of 2011, the USPS operates 31,000 post offices and locations in the U.S., and delivers 177 billion pieces of mail annually. The USPS has not directly received taxpayer-dollars since the early 1980s with the minor exception of subsidies for costs associated with the disabled and overseas voters.
By a voice vote at the end of 2006, a Lame-Duck Congress approved the Postal Accountability and Enhancement Act. In response to the needs identified in 2002 by the President’s Commission, the act replaced parts of the Postal Service Act, and focused the Postal Service on being a competitive monopoly. Much emphasis was placed on providing management flexibility to choose service rate levels and their costs. By doing this, Congress hoped the latest act would allow the Postal Service to function freely in the market. One of the main problems with the Bill, however, is that it forces to Postal Service to pre-paid seventy-five (75) years retirement and health benefit costs within 10 years, a restriction not imposed on any other Federal components.
In April 2011, Rep. Stephen Lynch (D-MA) introduced H.R. 1351, which would correct the overfunding of the Postal Service’s pension accounts. Lynch’s bill, “The USPS Pension Obligation Recalculation and Restoration Act of 2011,” instructs the Office of Personnel Management (OPM) to recalculate the Postal Service’s payments to the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) using updated methodology. Independent actuarial studies have concluded that as a result of improper funding formulas, the USPS has overpaid CSRS by $50 billion to $75 billion. FERS overpayments are estimated at $6.9 billion.
The measure says that if overpayments are found during OPM’s recalculation, any surplus would be transferred to the USPS. OPM also would be required to immediately repay the USPS money it overpaid into its FERS account. The Postal Service could use these funds to meet its retiree health benefits funding obligations. APWU President Cliff Guffey applauded the legislation, saying: “This bill would get the Postal Service on track toward fiscal solvency”.
H. R. 1351 appeared to pick up some momentum. As of today, the Bill has 216 co-sponsors, over half of the House. “It’s a good sign,” said APWU Legislative and Political Director Myke Reid. “Members of Congress are obviously hearing from concerned workers, business people, and citizens who are demanding that Congress act,” he added.
H.R. 1351 would allow the Postal Service to use billions of dollars in pension overpayments to the congressional mandate that requires the USPS to pre-fund the healthcare benefits of future retirees. No other government agency bears this burden, which forces the Postal Service to fund a 75-year liability in 10 years — at a cost of more than $5 billion annually. Without the mandate, the USPS would have a surplus of $1.5 Billion.
Unfortunately, Republican Rep. Darrell Issa, Chairman of the House Oversight and Government Reform Committee, is withholding action on H. R. 1351 while advocating his own bill, H.R 2309. Issa’s Bill would destroy the Postal Service as we know it and would do nothing to correct the cause of the USPS financial crisis. It would do nothing about the pension overpayments or the pre-funding requirement but it would establish a “solvency authority” with the power to unilaterally cut wages, abolish benefits, and end protection against layoffs. It also would create a board that would order $1 billion worth of post office closures in the first year and $1 billion worth of facility closures in the second year. If H.R. 2309 is enacted, thousands of offices throughout the country would be closed. I guess, this is another example of Republicans’ efforts to privatize the Postal Service and to destroy the American Postal Workers Union, but that’s just my take.
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