USPS pays another $5.5 billion for future retiree health
On Sept. 29, Congress adopted a “continuing resolution” (CR) that will fund the federal government through early December. Sens. Tom Carper (D-DE) and Dick Durbin (D-IL) worked tirelessly along with Senate Majority Leader Harry Reid (D-NV) to include an NALC-backed provision in the Senate version of the bill that would have deferred $4 billion of the $5.5 billion payment, due at midnight Sept. 30, to pre-fund future retiree health benefits. Unfortunately, Senate Republicans voted unanimously to block the postal measure, even though the U.S. Postal Service warned that making such a huge payment — which no other agency or private company is required to make — would seriously imperil its liquidity.
“It is very disappointing that GOP members of the Senate who have oversight responsibilities with regard to the Postal Service would take a party-line stance in this irresponsible action,” National Association of Letter Carriers President Fredric V. Rolando said.
Republican appropriators in the House took a similar partisan and irresponsible approach to both the CR and the Postal Service’s financial problems, blocking the inclusion of a deferral provision proposed by Reps. Stephen Lynch (D-MA) and Ed Towns (D-NY).
Rolando blamed the poisonous politics of the 2010 mid-term elections for scuttling the postal amendment.
“Too many politicians who know better have tried to deceive the public with claims that slowing the pre-funding payments represents a taxpayer bailout,” Rolando said. “No company has funded its post-retirement obligations as well as the Postal Service — our pensions are massively over-funded and we have put more away for future retiree health than any company in America.
“It simply makes no sense to force the USPS to use its limited borrowing authority and spend its limited cash reserves on liabilities that won’t come due for decades,” he added.
The Postal Service complied with the law and made the $5.5 billion payment as scheduled on Sept. 30, raising the balance in its Postal Service Retiree Health Benefits Fund to more than $41 billion, more than any company in the country and enough to cover retiree health care costs for decades to come. But the action reduces its end-of-the year cash position to just $2 billion and exposes the USPS to unnecessary financial risk.
Postmaster General Jack Potter observed: “The Postal Service sought a deferral of this $5.5 billion payment to minimize the risk of defaulting on our financial obligations in Fiscal Year 2011. Unfortunately, no legislative action has been taken at this time. The financial risk remains. We will carefully manage every dollar we spend in the upcoming fiscal year. Our current forecast shows that we will not have sufficient cash to make the $5.5 billion payment due on Sept. 30, 2011, and any major disruption, whether in volume loss or unforeseen circumstances, could cause us to default on financial obligations earlier in FY11.”
Pre-funding retiree health benefits is voluntary in the private sector. According to a survey by Towers Watson, only about one-third of all Fortune 1000 companies pre-fund at all. Those that do have put away far less than has the USPS to cover future costs (28 percent versus 46 percent).
No private company would voluntarily choose to make the kind of enormous pre-funding payment that the USPS did yesterday in current economic circumstances. “The legislators who blocked the pre-funding deferral are playing ‘Russian roulette’ with the Postal Service, a vital institution in the American economy,” Rolando said.