Postmaster General John E. Potter urged a congressional subcommittee to approve H.R. 22, which would alter the U.S. Postal Service’s payment schedule for funding retiree health benefits to help it cut costs. The USPS, mired in a spiraling fiscal crisis, is required by law to prefund health care benefits for all its retirees.
Total retiree health benefits costs in 2008 came to $7.4 billion—nearly 10% of the annual operating budget for the USPS. Without those payments, the USPS would’ve posted a positive net income in 2008.
The Postal Accountability and Enhancement Act of 2006 requires accelerated prepayment of future retiree health care costs. The USPS “is the only public or private entity required to prepay health benefit premiums at these extremely high levels,” Potter said in his testimony.
Potter, along with a slew of postal officials, appeared Wednesday before the House Oversight and Government Reform Federal Workforce, Postal Service and the District of Columbia Subcommittee in a session titled, “Restoring The Financial stability of the U.S. Postal Service: What Needs To Be Done?”
H.R. 22 would allow the USPS to pay $5.2 billion for each of the next eight years: “It relieves us of paying for health benefits each of those years,” Potter said. “It has the double benefit of protecting our people and giving us short-term relief.”
The USPS has not received an operational subsidy from Congress since 1982, and current estimates forecast the federal agency will lose a record $6.4 billion in fiscal 2009. That would be on top of losses of $2.8 billion in fiscal 2008 and $5.1 billion in fiscal 2007. The Postal Service last turned a profit of $900 million in fiscal 2006.
John F. Hegarty, national president for the National Postal Mail Handlers Union, strongly supported H.R. 22. “How often does Congress see a bill that would rectify a multibillion dollar debt situation, keep a vital function of government alive, yet costs the taxpayer not one cent?”
Other critical areas discussed included Potter’s proposal to reduce mail delivery from six days a week to five. Thanks to the increase in e-mail use, as well as the general economic slowdown, USPS officials said mail volume dropped by 4.5%, or more than 9 billion items, in 2008, to about 202 billion pieces.
If the decline in mail volume continues, Potter said, “we’re going to have to face a structural need to change something. The most obvious place is in delivery.”
BOG Chairman Carolyn Gallagher offered her thoughts about the fiscal crisis facing the USPS. “Within the limits of existing law, we cannot close the widening gap between revenue and costs and still maintain today’s service levels for this fiscal year,” she said. “Despite our aggressive plan to reduce cumulative costs over the next two years, our projections show that we will still lose another $13 billion over that period.”
Most of the postal officials who testified, and many committee members embraced the H.R. 22 proposal. The five-day mail delivery proposal was another story, perhaps best summed up by Ted Keating, president of the National Association of Postal Supervisors, when he said it would result in “the beginning of the end of the Postal Service.”