Postal Service “Crisis” Comes Entirely From Unorthodox Pre-Funding Mandate
I’m a little labor-heavy today, but this caught my eye. We’ve been discussing the imminent demise of the US Postal Service, and the potential loss of 120,000 good-paying jobs. But most of the near-term funding “crisis” for the USPS comes from an unusual pre-funding mandate for retiree benefits. James Parks explains:
The USPS economic crisis is the result of a provision of the Postal Accountability and Enhancement Act of 2006 that requires the Postal Service to pre-fund the health care benefits of future retirees—a burden no other government agency or private company bears.
The legislation requires the USPS to fund a 75-year liability over a 10-year period, and that requirement costs the USPS more than $5.5 billion per year. Guffey also pointed out that “the federal government is holding billions of dollars in postal overpayments to its pension accounts.”
All of the USPS losses over the past four years come from this mandate. You cannot find another organization in the world, AFAIK, that pre-funds 75 years of benefits over a 10-year period. And it’s not just the overpayments, it’s the opportunity costs of having to hold that much reserve capital that cannot be used when times are tough, or to invest in more attractive services. This results from a 2006 law that was one of the last time bombs of the Denny Hastert-Bill Frist Congress. That needs to change.
Today, rallies are being held from 4-5:30pm local time to support the postal service. The locations are available here. Just about every Congressional district in the country will see a rally.
Over time, the postal service could need some additional innovation, as mail volume reduces. I suggested they take on simple banking, and there are other ideas available. In the short-term, the pre-funding mechanism is the entire problem. Hopefully the rallies will stick to this very simple message.
The rallies were Tuesday, but the matter is still before Congress. More details here.