August 30, 2012

August 30, 2012
Postal Service Financial Problems:
10 Things They Don't Want You To Know

Welcome to another day in my life. Today is Thursday and I hope you are having a safe and great week so far. It is another busy week for Dab the AIDS Bear and me.

Since we get a lot of donations for our Dab the AIDS Bears, Dab the Breast Cancer Bears and our awareness pins; I often have to go to the post office to get deliveries in the mail. At my age, I have seen postage more than triple in price since I was a kid. But there is a lot the government is not telling you about the problems with our mailing system. So I am going to blog the next few days about things I have heard from post office employees about the current problems.

1. Your failure to send your Mother a proper birthday card is the least of our problems.

For four days at the end of June, retired letter carrier Jamie Partridge and nine other current and former postal workers didn't eat. They were on a hunger strike to protest what the group saw as the biggest threat to the U.S. Postal Service's continued existence: Not e-mail's steady encroachment on snail mail's territory, not a prolonged economic downturn or the growing popularity of corporate shipping services, but government-mandated payments to pre-fund health care benefits for postal retirees -- 75 years into the future. "To call out that Congress was starving the postal service, we were starving ourselves," Partridge says. Private-sector companies -- and even most other branches of the federal government, like, say, the Army -- aren't required to fund their health benefits so far in advance. It's an albatross of a financial burden on the Postal Service, hidden beneath the more striking headlines about shrinking mail volume -- down more than 21 percent since its 2006 peak -- and plummeting revenue. Indeed, in the first three quarters of 2012, the Postal Service lost $11.6 billion, more than twice what it lost during the same period in 2011.

Publicly, the Postal Service has blamed its financial woes on a waning interest in old-fashioned mail (exacerbated by the financial crisis). And it has cited that reason when it announced staff reductions -- about a quarter of its workforce, or 150,000 postal jobs, will be eliminated by 2016 -- as well as when it talked about closing post offices and when it proposed ending Saturday mail delivery, a measure currently pending in Congress. But some in the postal industry say that declining mail is just an excuse: "There is red ink -- but the overwhelming share has nothing to do with mail volume, the Internet, or other factors related to the mail," says Fredric Rolando, president of the National Association of Letter Carriers. The retiree health payments account for nearly 80 percent, or $9.2 billion, of the first three quarters' losses, and they "not only have exhausted the Postal Service's profits, savings and borrowing authority, they also have distracted the USPS from addressing the structural issues that do indeed exist as society changes," says Rolando, adding that there are "plenty of opportunities" in mail, including e-commerce shipping. "The prefunding of retiree health benefits for future retirees is a major cause of our financial crisis -- but not the only cause," says a USPS spokesman, citing decline in first-class mail as another major cause.

While many industry groups, including the Postal Regulatory Commission, have recommended that the health care payments -- the result of a congressional mandate passed in 2006, before the Postal Service's problems started -- be reduced to alleviate the burden, there is one massive roadblock: the federal budget. Because the retiree health prefunding payments are counted in federal funds, they are tied into the nation's budget, which some experts say amounts to the USPS subsidizing government operations. "So the Postal Service has been a kind of cash cow for the federal government for the last 40 years," says Postal Regulatory Commission chairman Ruth Goldway.

2. Our retirees are just fine, thanks.

On Aug. 1, for the first time since the 2006 mandate, the Postal Service did not pay its $5.5 billion annual retiree health benefits bill, and announced that it's likely to default on the next payment too, due Sept. 30. While the announcement raised red flags of concern for the welfare of retiring postal workers, experts, including postal employee unions, contend that the retirees will be fine -- or may even be better off -- if the USPS doesn't pay another cent into the fund for a long time. Indeed, Postal Service inspector general David Williams wrote a letter to the Senate earlier this year recommending just that -- eliminating the annual payments and letting the $44 billion fund grow with interest. Despite the Postal Service's debt, its retiree benefit coffers are beyond full. Its pension funds are more than 100% funded, compared with 42% for all federal pension funds and 80% for the average Fortune 1000 pension plan. That "astonishingly high figure," according to Williams, amounts to a "war chest" of resources that will take care of older workers for decades to come.

"The irony," says the NALC's Rolando, is that "today's postal retirees, and future retirees, are well protected," while the Postal Service's financial status is in jeopardy. If it continues to struggle financially, it will likely cut back on post office locations and hours as well as delivery service -- which some experts say could disadvantage retirees and other Americans who rely on the Postal Service for efficient correspondence.

3. Anybody want to buy an ailing government agency?

As a federal agency, the Postal Service is something of a platypus: It is bound by law to perform certain functions -- the old postman's motto goes, "Neither snow or rain nor heat nor gloom of night will stay these couriers from their swift completion of their appointed rounds" -- but it also has to report financial results like a business. Some economists say turning the postal service into a corporation with a board of directors and a fiduciary duty to shareholders would allow it to make sound financial decisions based on market conditions, rather than falling prey to political motivations and bureaucratic red tape. Under the current system, "managers are hamstrung," says Richard Geddes, Cornell University professor of policy analysis and management and a visiting scholar at the American Enterprise Institute for Public Policy Research.

But closing unprofitable post offices and stopping delivery on low-volume days would undermine the original equality-minded mission of the Postal Service to keep the country connected through the mail and to enable efficient communication to the most remote corners of the nation. "It would do things beneficial to the bottom line but not to the country," says Steve Hutkins, a New York University professor who advocates for the protection of the Postal Service through his site Even proponents of privatization admit that it would be difficult. "Any change is like shifting the direction of a battleship," Geddes says. When the idea was first floated in the 1990s, "the comment that I got was, Who would buy it?" says PRC chairman Goldway. "I don't think the market realities are there now."

A USPS spokesman says privatization isn't the answer, adding that it would be hard for even a private company to profit serving rural areas, and that the Postal Service has a business plan to become "financially sound and continue universal service to all Americans."

I'll continue this topic in the blog tomorrow. Hope you have a beary safe and great Thursday.

Until we meet again; here's wishing you health, hope, happiness and just enough.

big bear hug,

Daddy Dab