Not $8.5 Billion
On November 12, the U.S. Postal Service released a report that stated it had lost a staggering $8.5 billion in Fiscal Year 2010, which ended September 30.
Media coverage of the report predictably focused on its negatives—the historically high figure is undeniably a headline-grabber—and news stories, shying away from the somewhat harder analysis the report demanded, laid the blame for the losses on the ever-rising use of e-mail, text messaging and paying bills online as a substitute for communicating via postal mail.
But take away two key complications that are completely beyond the Service’s control, and you’re left with the real story: that postal losses instead amounted to about $500 million—still a lot of money, but considerably lower than $8.5 billion, and down by more than 50 percent from last year’s $1.1 billion loss.
The first complication is one that should sound familiar to all letter carriers by now. A 2006 congressional mandate legally bound the USPS on September 30 to once again make a $5.5 billion payment toward pre-funding its Postal Service Retiree Health Benefit Fund. This 10-year mandate to front-load the PSRHBF is both highly unusual (no other corporation or agency is required to pre-fund benefits at such an onerous level) and unnecessary (before September 30, the fund was already contained enough cash to cover current and future retiree health benefits for decades to come).
Last year, a postal-friendly Congress voted to help the USPS out and allowed a one-time, significant reduction in its 2009 payment requirement. In September, that same Congress, this time around perhaps preoccupied with election-year politicking, rejected a similar measure. (Though, to be fair, the Postal Service shares some of the blame here for its time-wasting campaign to cut out Saturday mail delivery, waiting until almost the last minute to press for this much-needed relief.) And so, a Postal Service already short on cash was forced to make the full $5.5 billion payment.
But this year, a second complication entered the equation. An adjustment was made in how workers’ compensation costs are calculated, based on the government’s assumptions about interest rates and long-term predictions regarding compensation and health care costs. Even though no actual money changed hands, generally accepted accounting practices forced the Postal Service to recognize on its balance sheet a non-cash expense of $2.5 billion.
Using simple math, you take the $5.5 billion for pre-funding the PSRHBF, add $2.5 billion for future workers’ compensation costs, and you get an $8 billion loss. Add the actual half-billion dollars’ worth of business losses, resulting mainly from still struggling mail volume (thanks to the country’s deepest recession in nearly 80 years), and that’s where the marquee $8.5 billion figure comes into play.
(It’s worth noting that, under very trying circumstances, the Postal Service is actually doing very well. Over the last four years, if it hadn’t been for that pre-funding requirement, the Postal Service would have recognized a net $700 million profit.)
Our union’s focus continues to be on getting Congress to authorize the transfer of the Postal Service’s money—estimated to be anywhere from $50 billion to $75 billion overpaid into the Civil Service Retirement System since 1971—into the PSRHBF.
The NALC will continue to press for passage of Rep. Stephen Lynch’s bill, H.R. 5746, which calls for just such a strategy. If we’re successful, and the retiree health fund becomes fully funded, we will be well positioned to fight for the repeal of postal reform’s pre-funding mandate. Our hope is to pick up a newspaper next November that carries a headline, “Postal Service recognizes solid profits.”