The Postal Service lost $15.9 billion in fiscal 2012, in a record-setting loss for the cash-strapped agency.
But the troubling financial news began even earlier this week, when it was revealed that surplus payments the Postal Service made to the Federal Employee Retirement System are much smaller than once thought. USPS had wanted to use those overpayments to pay down some of its debts.
Postmaster General Patrick Donahoe said the bad news underscores the urgent need for postal reform legislation and renewed his call for Congress to act in the lame-duck session.
The shrinking surplus
In an Oct. 30 letter, Office of Personnel Management Director John Berry informed Donahue of a “significant change” in the agency’s FERS pension estimate. Last year, the surplus was estimated to be $11.4 billion. But because of a reduction in projected long-term interest rates, OPM estimated the surplus would drop to $2.6 billion.
USPS has long sought to have the overpayments refunded to the agency.
The problem, USPS officials say, is that OPM uses governmentwide demographics and salary information — as opposed to agency-specific data — to calculate the FERS surplus.
If OPM used data based on the actual USPS workforce, its FERS surplus would grow back into the double digits, said USPS Chief Financial Officer Joe Corbett.
“It makes no sense to use the wrong data, especially in a time when we definitely have applications for that money to knock the debt down,” Donahoe said on a conference call with reporters.
And whatever the surplus turns out to be, Donahue said the agency has good uses for it.
“Whether it’s early-out or whether it’s used to pay the debt down … or at some point needed to make some important capital investments in, say, our delivery fleet — those are all the things that need to be addressed in this organization.”
Corbett said USPS was “disappointed, but not totally surprised” by OPM’s revised surplus projection.
The independent Board of Actuaries calculates the long-term interest rates which caused the estimated surplus to drop. The rate changes appear reasonable, Corbett said. “Why the timing of changing it this year as opposed to next year or last year is really a question,” he said. “Nonetheless, there’s not much we can do to influence that.”
Donahoe: Legislation would remove “dark cloud”
Donahoe places much of the blame for the agency’s financial woes at the feet of Congress. He said USPS would be profitable if lawmakers had set aside their differences and passed comprehensive legislation this year. He echoed his recent call for Congress to take up a bill during the lame duck session.
The Senate approved a postal reform bill in the spring. However, the House version, which takes a very different tack to returning the USPS to solvency, has languished. The Senate bill would refund to USPS its FERS overpayments, allow the agency to offer buyouts to 100,000 retirement-eligible employees and create a separate health-insurance program for employees. but the bill was less clear on ending Saturday delivery and would actually make closing facilities, such as mail-processing centers, more difficult.
The House bill on the other hand would defer near-term payments on retiree health care benefits, allow the agency to move to a five-day delivery week and create an independent board with the power to restructure the Postal Service, including recommendations for facility closures.
“We are still walking a financial tight-rope,” Donahoe said. “Our business model is such that we cannot return to profitability without this legislative solution. We cannot sustain these large losses indefinitely.”
If a bill were passed today containing only the retiree health benefits provision and eliminating Saturday delivery, that alone would save the Postal Service $8 billion, Donahoe said. “We are asking Congress to remove this dark cloud that we’ve got over our finances,” he said.