PMG Potter to Address Worsening USPS Finances Wednesday

Source: National Association of Postal Supervisors (NAPS) Legislative and Regulatory Update – January 26, 2009 (
Rumors have been swirling throughout the Postal Service in recent weeks about big changes coming: significant plant consolidations, area and district staffing reductions, craft work-hour cutbacks, the list goes on.  The Postal Service has remained mum about these rumors.  One union president has been particularly candid about the prospects for significant change.  Mailers are concerned about the possibility of USPS filing for an emergency rate increase in 2009, to supplement the annual rate hike available in May.

Greater clarity should come about on Wednesday afternoon when Postmaster General Jack Potter appears before a Senate postal oversight panel to testify on the deteriorating financial health of the Postal Service and what can be done to stabilize the ship.

Sen. Tom Carper (D-DE), chairman of the Senate Federal Services Subcommittee, has called the hearing to learn how badly the flagging economy is hurting the Postal Service and whether the Postal Service should receive any kind of relief, and if so, what kind and how much.

The Postal Service is Hurting 

    There’s no doubt about it.  The worsening economy has thrown the Postal Service into a financial tailspin.  Mail volume is declining at a pace not seen since the early 1930’s.  The business sectors that have provided the greatest amount of mail to the Postal Service – financial services, retail and housing – are among the industries hardest hit by the worsening recession. Direct mail campaigns are being cut back or coming to a screeching halt.  In 2008, the Postal Service lost $2.8 billion, and volume declined by 9 billion pieces.  Current trends indicate that USPS this year could lose $4 billion or more.

    No one knows whether the lost mail volume will return when the economy revives, or how long that will take.  Significant structural changes to the Postal Service, even to its business and products model, are inevitable, but those take time and are several years down the road.  
    The USPS can only do so much in shedding costs, while preserving service quality and its universal service obligation.  Given the way the Postal Service is a barometer of the economy, it’s no wonder that the Postal Service’s finances have tanked. 
    The House version of the economic stimulus package, set for a vote in the House on Wednesday, does not include relief for the Postal Service.  The Senate stimulus measure is still being crafted, but questions remain whether an appropriation for the Postal Service is necessarily the right move. 
Reducing the Strangle Hold of Prefunding Postal Service Retiree Health Care

    One of the best ways to provide financial relief for the Postal Service is through the reduction of one of the Postal Service’s largest costs – its payments toward the future health insurance premiums of its retirees. This prefunding obligation was created by the 2006 postal reform law, with a payment schedule far too ambitious, especially now.  No federal department or agency has this kind prefunding obligation, nor are USPS or FedEx required to do the same, nor do they.
    In response, Rep. John McHugh (R-NY) and Rep. Danny Davis (D-IL) have introduced legislation, H.R. 22, that will address the USPS prefunding requirement and make a simple but significant change in the law.  HR 22 will permit the Postal Service to satisfy its payment for the premiums of current retirees out of the $32 billion that USPS has already set aside (including the infamous “escrow” lockbox) for future retiree health insurance premiums. 

    NAPS President Ted Keating and the presidents of the six other postal management associations and postal employee unions urged the Congressional leadership last month to include prefunding relief for USPS in the economic stimulus package.
    The change would not affect the health insurance benefits of any retiree.  Nor it is a bailout; it simply would revise the payment schedule under which the Postal Service makes down payments for the health insurance premiums of its future retirees.

    In these difficult economic times, the question becomes: Should the Postal Service be forced to annually prefund $5.4 billion for future retirees, in addition to paying the $2.3 billion for current employees, when it cannot afford these payments right now and is going deeper and deeper into debt?”

Wednesday’s Senate hearing will take a closer look at this issue and others. 
Bruce Moyer
NAPS Legislative Counsel