U S Postal Service Faces Financial Shortfall Unless Congress Addresses Mandates

Postmaster General Patrick R. Donahoe told a Senate subcommittee today that despite significant cost cutting and revenue generation, the Postal Service finds itself in dire financial straits. Statutorily mandated payments due to the government at the end of September will not be paid, he said, unless Congress acts to refund overpayments of pension funding or ease the mandate to prefund retiree health benefits.

Testifying before the Federal Financial Management Subcommittee of the Senate Committee on Homeland Security and Governmental Affairs, the PMG said that the financial condition of the Postal Service is such that in the absence of comprehensive legislation, there are required federal payments that are now in jeopardy. “As things stand, we do not have the cash to make a $5.5 billion prepayment for future retiree health benefits due Sept. 30,” he said.

He also alerted subcommittee members that the cash shortfall could extend to operational expenses. “Despite our significant role in the American economy and our aggressive cost cutting and revenue generating efforts, I regret to say we are in a serious financial predicament today,” he said.

For three years, the Postal Service has been asking Congress to alter the payment schedule of a mandate in a 2006 law that, unlike any other federal agency, requires the Postal Service to prefund retiree health benefits in amounts approximating $5.5 billion. In addition, the Postal Service has asked to gain access to $50 to $75 billion in overpayments it has made to the Civil Service Retirement System (CSRS) and a $6.9 billion it has overpaid to the Federal Employees Retirement System (FERS).

Since inception in 2006, the Postal Service has paid some $20.9 billion into the Retiree Health Benefit Trust Fund. Under current law, the Postal Service is scheduled to continue to make $5.5 to $5.8 billion in payments up to and including 2016.

With the right legislation, however, Donahoe told the subcommittee, the Postal Service can return to profitability and if given flexibility, “the Postal Service can continue to serve the American public very effectively and continue to sustain and propel American commerce.”

The subcommittee chairman, Sen. Tom Carper (D-DE), introduced legislation today that addresses the financial issues confronting the Postal Service and, among other things, allows a transition to a five-day delivery schedule, a move that could effect an annual saving of $3.1 billion.

In asking for urgent consideration of legislative action, Donahoe said that although the agency’s financial condition is dire, the Postal Service is nonetheless a strong and a vital part of the economy, but the continued burden of the retiree health benefit prefunding “continues to have a negative impact on our business.”