U.S. Postal Service insists it doesn’t need bailout, just access to overpaid retirement funds

Alexis Levinson Political Reporter
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Without some kind of legislative action in the very near future, the United States Postal Service (USPS) will default on the money it owes to the federal government and could become the next large company to require a bailout, according to members of the House committee in charge of the postal service.

On Wednesday, the House oversight subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy held a hearing cleverly entitled “Pushing the Envelope: The Looming Crisis at USPS” to discuss the Postal Service’s financial woes. The Postal Service has been losing money for several years now. As Washington, D.C. Democratic Del. Eleanor Holmes Norton put it, “ever since I have been on the committee, it has been a looming crisis.”

But the problem will come to a head at the end of the fiscal year in September, by which time, according to Postmaster General Patrick Donahoe, “the Postal Service will reach its statutory borrowing limit … thus resulting in a cash shortfall. Without changes…the Postal Service will be forced to default on a financial obligation to the federal government, due at the close of the fiscal year on September 30, 2011.”

No one quite knows what happens if the USPS does default. There is no provision in the law to deal with such an eventuality. But the word that echoed around the committee Wednesday was “bailout.”

“A continued imbalance between revenues and costs means that taxpayers could ultimately be asked to bailout the Postal Service,” said Florida Republican Rep. Dennis Ross, who chairs the subcommittee.

Donahoe wants “changes” made to a law passed in 2006 requiring the Postal Service to prefund all future retiree’s health benefits, to the tune of $5.5 billion each year, which he refers to as an “onerous obligation.”

Moreover, he said, the Postal Service was found to have overpaid into two retirement funds for employees: the Civil Service Retirement System has a $75 billion surplus, according to Donahoe, and the Federal Employees Retirement System has been overpaid by about $7 billion. Access to these two funds would put the Postal Service back in the black and give it the necessary stability to take steps to address its long-term problems, like the declining volume of first class mail.

According to a person involved with the subcommittee, such a proposal would simply be too shortsighted.

“Any short term fix must be wedded to systemic change,” the person said. “If USPS is not making long-term reforms to bring its expenses in line with diminishing revenues, there is real doubt that a majority of members would support kicking the can down the road for yet another year.”

Donahoe insisted during the hearing that the USPS did not need a bailout, but only because he believes the USPS is entitled to its overpaid retirement funds. If Congress will not agree to that, then the remedies to the USPS’s fiscal problems are not yet clear. The USPS cannot be shut down: its existence is mandated in the Constitution, and as oversight committee Chairman Darrell Issa said at the start of the hearing, “no Congress has ever suggested that we don’t need a post office, and this will not be the one” to do so.

Ultimately, the USPS running out of funds is not a winning situation for the government. If this does happen, “we will deliver mail, we will pay employees to deliver mail, make sure we pay our suppliers,” said Donahoe. “The thing we will not do is be able to pay the federal government.”