The Postal Service suffered two punishing blows this week: The Postal Regulatory Commission (PRC) rejected a request for a rate increase, and Congress refused to give the USPS relief from the requirement to pay $5.5 billion by Sept. 30 to pre-fund future retiree healthcare obligations.
The Postal Service requested the rate increase under the “exigency” provision of the Postal Accountability and Enhancement Act of 2006 (PAEA), which restricts the Postal Service’s authority to increase postage based on its needs. The PAEA limits rate increases to the rate of inflation, except in “exigent” circumstances, which the law defines as “extraordinary or exceptional.”
The PRC accepted the USPS contention that the severity of the recession constituted “extraordinary or exceptional” circumstances, but it said the Postal Service failed to demonstrate that its recent financial losses were caused by the recession.
The mandate to pre-fund retiree healthcare obligations is also a provision of the PAEA.
The APWU vigorously opposed the PAEA, including the limits on the right of the Postal Service to raises rates. “External restrictions on the Postal Service’s right to increase revenue will invariably result in limits on the union’s collective bargaining rights,” APWU President William Burrus explained.
“The PRC ruling fully justifies the APWU’s objection to the PAEA, and stands as stark evidence that the supporters of the legislation erred in their decision to require the Postal Service to pre-pay billions of dollars in future healthcare costs while severely limiting its opportunity to increase revenue,” he said.
Dangerously Low Reserves
The Postal Service now finds itself with dangerously low cash reserves, and estimates a $7 billion loss for Fiscal Year 2010, which ended Sept. 30. Most of the agency’s deficit is caused by the pre-funding requirement, which no other federal agency or private company is required to make. The pre-funding mandate is a provision of the PAEA, which requires such payments annually for 10 years.
This difficult situation makes it urgent that APWU members encourage legislators to support H.R. 5746, a bill that would restore financial stability to the Postal Service, Burrus said. Two recent studies concluded that — as the result of an improper funding formula — the agency overpaid the Civil Service Retirement System (CSRS) billions of dollars. A study by the USPS Office of Inspector General, conducted in January 2010, found that the USPS overpaid $75 billion; a study commissioned by the Postal Regulatory Commission concluded in July that the USPS overpaid $50 billion to $55 billion
H.R. 5746 (the U.S. Postal Service CSRS Modification Act), which was introduced by Rep. Stephen Lynch (D-MA) on July 15, would alter the methodology for allocating the Postal Service’s share of pension costs for employees whose careers spanned the former Post Office Department and the USPS. It also would permit the Postal Service to meet the pre-funding requirement using the surplus in the retirement fund.
“Despite recent assertions by prominent Republicans on the House Oversight and Government Reform Committee, using the overpayment in this fashion would not constitute a bailout,” Burrus noted. “The Postal Service would be using its own money to meet the unreasonable and burdensome pre-funding requirement.”
“Simply put, passage of this bill is vital to the future of the Postal Service,” he said. “We must do everything in our power to see that it becomes law.”
“Our members also must consider the future of the Postal Service when they vote on Nov. 2,” Burrus said. If the Republican Party takes control of Congress in the fall election, the likelihood of passage would be greatly diminished.
In rejecting the Postal Service’s request for an exigent rate increase — which would raise postage costs above the rate of inflation — the PRC said the USPS failed to show that its financial difficulties are the result of the recession. Rather, the commission said, the losses are a direct result of the provision of the congressional mandate to pre-fund retiree healthcare benefits.
“Although the PRC’s ruling will make the Postal Service’s financial situation more difficult,” Burrus said, “it supports our view about the cause of those difficulties.
“We must make it clear to legislators that the future of the USPS hangs in the balance. We must insist that they support H.R. 5746.”