USPS: Leglislative Relief or Bust?

Sep 10, 2009 3:30 AM  By

Dealing with massive financial losses coupled with steep declines in mail volume, the U.S. Postal Service is counting on pending legislation to survive.

Legislation in the House (H.R. 22) and Senate (S-1507) is designed to temporarily relieve the USPS of its federally mandated obligation to prefund retiree health care benefits out of its operating budget.

The USPS fiscal year closes Sept. 30, which is when a $5.4 billion health-care retiree payment comes due. If the pending legislation is not passed, USPS probably can’t make this payment. What happens then?

“We don’t know of any repercussions,” says Joseph Corbett, executive vice president and chief financial offer for the USPS. “We’re still very hopeful with working with Congress and the administration to not reach that point.” The best outcome is to have legislation passed that addresses the situation, he notes.

Corbett is unsure if Congress will vote on the pending legislation prior to Sept. 30. “We’ve notified all our stakeholders – the Treasury Department, Office of Personnel Management, Office of Management and Budget, the administration — and have been very clear we should work expeditiously for legislation for some relief,” he explains.

With no legislation, he notes, “we would literally run out of cash” if required to pay the $5.4 billion health-care retiree benefits on Sept. 30. “We continue to work feverishly with the administration and with Congress and are making all efforts with the goal of passing something before the end of the fiscal year.”

H.R. 22, introduced on Jan. 6 by Rep. Danny Davis (D-IL) and Rep. John McHugh (R-NY), would allow the USPS to pay for healthcare benefits for current retirees out of its Retiree Health Benefit Fund—which currently hovers around $32 billion—instead of its operating budget. H.R. 22 and S-1507 would provide the USPS up to three years of relief.

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 USPS doesn’t have a preference between the two bills, Corbett says. “We need to make sure that one version of those bills passes. Either bill is a step in the right direction.”