Postal Service Facing Insolvency, Seeking Congressional Action

National Journal: “The U.S. Postal Service Has Lost $2.6 Billion So Far This Year And Will Require Significant Help From Congress To Get Back On Track.” From the National Journal:

The U.S. Postal Service has lost $2.6 billion so far this year and will require significant help from Congress to get back on track, officials said on Tuesday. During a board meeting, Postal Service leaders reported large losses through the second quarter of 2011. USPS lost $1.9 billion in that same period in fiscal 2010. The agency continues to face long-term financial challenges and despite significant cost reductions will reach its statutory borrowing limit by the end of the fiscal year and default on a number of obligations to the federal government, officials said.

[...]

Chief Financial Officer Joseph Corbett said the Postal Service does not expect to meet its cash obligations this year, including a $5.5 billion prepayment to its retiree health benefits fund, due Sept. 30. A $2.8 billion prefunding requirement for these benefits, along with a $700 million workers' compensation liability, contributed to the $2.6 billion fiscal 2011 loss. [National Journal, 5/10/11]

Varney Falsely Claims USPS Looking “For A Bailout,” Instead Of Cutting Costs “Like A Business”

Varney Falsely Claims Postal Service Is Not “Cutting Costs” And Is Giving Union Workers “A Pay Increase.” On the May 17 edition of Fox News' Fox & Friends, the co-hosts brought on Fox Business host Stuart Varney to discuss the announcement that the US Postal Service has been continuing to lose money and is now seeking federal assistance. From the broadcast:

CARLSON: The [United States Postal Service is] now asking Congress to cover health care obligations for their retired workers.

KILMEADE: ... Reports are that the costs could be anywhere from $50 to $75 billion. Stuart Varney says it's the same old government story. But this is huge numbers at a very, at an unprecedented time.

VARNEY: In 1970, the law was changed. It became from the post office to the United States Postal Service. It's supposed to be run like a business. It's not happening. The postal service is going to lose $42 billion in the next four years. They are flat broke. They cannot afford to pay into their pension fund. They've gone to -- the union, actually, has gone to Congress, which is sponsoring a $50 to $75 billion bailout for the postal service. Extraordinary stuff.

CARLSON: And this is for the pensions of the workers?

VARNEY: Yes, it's for pensions -- because they can't afford to pay the pensions of retired postal workers. OK? They haven't got the money to put into that fund. It's running out. It's going broke.

CARLSON: I seem to recall a couple of years ago where we were talking about the immense salary of the gentleman who ran the post office.

VARNEY: Well -- the postal workers, the union, 205,000 of them, they've just gotten a pay increase. Three and a half percent spread over four years. They've got a no layoff clause built into that. And they're getting cost of living allowances. So they're getting a pay raise. As the postal service loses more and more money -- now, if it really was run like a business, they'd be cutting costs left, right and center. But it's not run like a business. So they've gone to the government for a bailout. And they're likely to get it.

CARLSON: They are?

KILMEADE: Stuart, I am surprised --

VARNEY: Yes. Because they've got political support.

KILMEADE: But I am surprised along with that doesn't come some strings to reorganize and have more payments into -- just like what we're seeing Governor Cuomo, who gave a big speech on Long Island -- tell all the state workers, you've got a new deal that's coming your way. And you're paying more.

VARNEY: Fair point. But you cannot change the postal service. You can't close a post office, you can't reduce service without Congress' approval. So you've got to get that. That's why it is a politicized organization, not like private enterprise. They're totally different.

CARLSON: But can't Congress say to them, here are the parameters in which we will give you additional money?

VARNEY: Yes. Yes. But this is another bailout, on top of General Motors, Fannie and Freddie, the banks -- you name it. They all got bailouts. Here's another one. You can see it coming down the pike right at you.

KILMEADE: So the only losers are the taxpayers unlike the auto bailout where there were losers.

VARNEY: That's correct. We're losing a lot of money on the postal service because of electronic mail. How do you compete with that? You can't shrink the postal service -- you bail it out. We lose. [Fox News, Fox & Friends, 5/17/11]

But USPS Has Cut Costs And Seeks Additional Cost-Cutting Measures

In 2009, USPS Closed Six District Offices, Cut 50 Million Workhours, Halted Construction Of New Post Offices, And Froze Salaries Of Postal Service Officers And Executives. The USPS has been cutting costs for the past several years, as mail volume has declined. From a March 2009 press release from the USPS:

With no signs of economic recovery in sight, the U.S. Postal Service is taking bold actions in response to its ongoing financial crisis. Today the Postal Service announced it would be closing six of its 80 district offices, eliminating positions across the country and offering another early retirement opportunity. These actions are expected to save the Postal Service more than $100 million annually.

[...]

In the past year the Postal Service has taken very aggressive cost-cutting actions, including:

• Cutting 50 million workhours;
• Halting construction of new postal facilities;
• Negotiating an agreement with the National Association of Letter Carriers that adjusts letter carrier routes to reflect diminished volume;
• Freezing salaries of all Postal Service officers and executives;
• Instituting a nationwide hiring freeze;
• Reducing authorized staffing levels at postal headquarters and area offices by at least 15 percent;
• Selling unused and under-utilized postal facilities;
• Adjusting Post Office hours to better reflect customer use; and,
• Consolidating mail processing operations. [USPS.com, 3/20/09]

Reuters: “U.S. Post Office Looks To Cut Costs As Mail Drops.” From a March 2010 Reuters article:

The U.S. Postal Service, faced with a dwindling number of customers and growing shortfalls, plans to raise prices, cut costs and ask for rule changes to make the struggling service more flexible, Postmaster General John Potter said on Tuesday.

Because of email and private delivery companies, mail volume is expected to be down about 10 billion pieces in 2010 with first class mail expected to drop 37 percent by 2020, leaving the service with a cumulative shortfall that could hit $238 billion by 2020, USPS said in a press release.

[...]

USPS, which delivers nearly half of the world's mail, has posted net losses since 2007. It faces stiff competition from email as well as FedEx (FDX.N) and United Parcel Service (UPS.N).

Potter outlined a series of efforts to save money, including restructuring retiree health benefits, changing delivery schedules, and expanding efforts to sell stamps and provide other services online and at grocery stores and other retailers.

“If given the flexibility to respond to an evolving marketplace, the postal service will continue to be an integral part of the fabric of American life,” Potter said in the release.

In February, USPS posted a loss of $297 million for the first quarter of its fiscal year, blaming the recession and the use of electronic mail.

The loss marked a slight improvement over the prior-year period due to cost cutting, but USPS warned the trend was worrisome.

[Reuters, 3/2/10]

Wash. Post: “Despite The Losses, USPS ... Cut About 9.6 Million Work Hours ... [And] Plans To Cut About 7500 Administrative And Postmaster Positions By Next Spring.” From a recent post on the Washington Post blog Post Politics:

The U.S. Postal Service reported $2.2 billion in losses during its second quarter, continuing several quarters of historic losses amid declining mail volume and financial obligations to prefund worker retirement benefits.

[...]

Postmaster General Patrick R. Donahoe renewed his hope that Congress will act soon to give him more flexibility to set delivery routes and repeal a law requiring USPS to pay about $5.4 billion to prefund future retiree benefits.

“The Postal Service may return to financial stability only through significant changes to the laws that limit flexibility and impose undue financial burdens,” Donahoe said Tuesday in a statement.

Postal officials have long argued that without that law, its losses would be much less significant.

Despite the losses, USPS also cut about 9.6 million work hours; the total postal workforce numbered 571,566 in March, a drop of about 6,700 from the previous year, officials said.

The Postal Service plans to cut about 7,500 administrative and postmaster positions by next spring. So far, about 2,000 staffers have taken buyouts. [Washington Post, Post Politics, 5/10/11]

National Journal: Postal Service Seeks Reform Of Workers' Comp Program For Additional Savings. From the National Journal:

The Postal Service could save $37.8 million annually through reform of its workers' comp program, however, according to recent findings from the USPS inspector general. Under the 1916 Federal Employees' Compensation Act, which provides basic compensation and medical, rehabilitation and death benefits for government workers injured on the job, base payouts amount to two-thirds of salary for disabled employees with no dependents and 75 percent for those with one or more dependents. The Postal Service paid $1 billion in workers compensation in 2010, along with $61 million in administrative fees.

Under a Labor Department proposal, basic compensation for total disability would be 70 percent of salary. Benefits would drop to 50 percent, however, when the employee reaches retirement, defined as between ages 65 and 67, or one year after payments begin, whichever is later. According to the OIG report, nearly 2,800 postal employees over the age of 65 receive workers' comp, including 705 who are older than 80.

According to Corbett, the Postal Service is seeking support in Congress to make changes to the workers' comp program. Sen. Susan Collins, R-Maine, in February introduced a bill that would reduce federal workforce costs by converting employees on workers' compensation to the appropriate retirement system when they reach retirement age. [National Journal, 5/10/11]

New USPS Union Contract Would Cut Total Wages, Not Increase Them

Proposed USPS Union Contract Would “Freeze Wages For The First Two Years Of The 4 ½ Year Contact.” Contrary to Varney's claim that postal service workers have “just gotten a pay increase,” Bloomberg reported in April that the USPS's proposed contract agreement with the American Postal Workers Union would freeze worker wages for “the first two years of the 4 ½ year contract.” [Bloomberg, 4/5/11]

Donahoe: Contract “Leads To Wage Savings Of $1.8 Billion Over The Term Of The Agreement.” From a transcript of the testimony of Postmaster General Patrick Donahue at a House Oversight and Government Reform Committee Hearing on April 5, which was called, “Are Postal Workforce Costs Sustainable?”:

Since 2008, we have reduced 110,000 employees, and $11 billion in costs. We recently announced the reduction of an additional 7,500 managerial positions.

Our total full-time career complement today is 572,000 employees. We will continue to reduce the number of full-time career employees, thereby reducing our legacy costs. By 2020, the Postal Service workforce will be less than 400,000.

[...]

This tentative agreement [with the American Postal Workers Union] also provides immediate cost relief by freezing wages for the first two years, and leads to wage savings of $1.8 billion over the term of the agreement. We negotiated structural changes that resulted in a two-tier career pay schedule for new employees that is 10.2 percent below the existing schedule.

We will also be able to increase the use of non-career employees from the 5.9 percent today with restrictions, to roughly 20 percent totally unrestricted. These changes provide a $1.9 billion benefit. [From the testimony of John Donahue, Congressional Documents and Publications, 4/5/11, accessed via Nexis]

Moreover, Hundreds Of Private Businesses Have Received Federal Assistance In The Past Few Years

ProPublica: 928 “Bailout Recipients” As Of May 6, Most Of Which Were Private Companies. Contrary to Varney's suggestion that businesses in financial trouble would cut costs instead of ask the government for a bailout, ProPublica currently lists 928 organizations that have received “taxpayer money ... in the ongoing bailout of the financial system.” The database includes “government-sponsored enterprise[s]” like Fannie Fae as well as private companies like banks, auto companies, insurance companies, and mortgage services. The site's “scorecard” of the database indicates that the list was last updated on May 6. [ProPublica, accessed 5/17/11]

*This item has been updated for clarity.