Unlike the federal government as a whole, and state and municipal governments across the country, the Postal Service funded retirement obligations as they were incurred. My annuity is paid by the Civil Service Retirement System (CSRS). The Postal Service’s share of the CSRS is funded one hundred percent (actually more at one point, the Postal Service overpaid by tens of billions of dollars as a result of gross incompetence by the billing and actuarial functionaries at OPM). As of the time I retired, the Postal Service was timely in funding its retiree healthcare obligations.
I like to think, we as group of hard working and dedicated colleagues in the Postal Service’s finance function, played significant roles in the organization’s success, even if we did manage to piss people off by designing, proposing and implementing unpopular rate increases, by fighting unions to hold down labor cost increases, by supporting automation programs that “cost” the Postal Service hundreds of thousands of jobs, and by differentiating product offerings to eliminate cross-subsidies (creating winners and losers) among mailers. But the mind set, and the commitment to these principles started slipping during the Bush administration and went totally to hell in the world of Obama.
The Postal Service announces today that it is dropping Saturday delivery. The explanation is the need to reduce cost. The complaint focuses on funding retirement benefits.
The financial losses for the fiscal year ending Sept. 30 were more than triple the $5.1 billion loss in the previous year. Having reached its borrowing limit, the mail agency is operating with little cash on hand.
The agency's biggest problem — and the majority of the red ink in 2012 — was not due to reduced mail flow but rather to mounting mandatory costs for future retiree health benefits, which made up $11.1 billion of the losses. Without that and other related labor expenses, the mail agency sustained an operating loss of $2.4 billion, lower than the previous year.
The health payments are a requirement imposed by Congress in 2006 that the post office set aside $55 billion in an account to cover future medical costs for retirees. The idea was to put $5.5 billion a year into the account for 10 years. That's $5.5 billion the post office doesn't have.
No other government agency is required to make such a payment for future medical benefits. Postal authorities wanted Congress to address the issue last year, but lawmakers finished their session without getting it done. So officials are moving ahead to accelerate their own plan for cost-cutting.
Oh yes, not at all due to “reduced mail flow”. Sure. Right. High margin, high revenue per piece First-Class Mail volume is down more than 30 percent from its 2001 peak. Total mail volume dropped from 213 billion pieces in 2007 to 160 billion pieces last year. I told the bureaucracy prior to the 2008 financial meltdown that the Postal Service wouldn’t recover from the next recession, let alone find a growth path needed to fund service to the growing delivery network. But inside the Postal Service there was no more paying heed to anyone who was not a politician, no more commitment to earning its keep. Congress will not let the Postal Service go out of business I was told. It's a slippery slope. The spinners are in charge. Economic reality and facts lost weight in the era of Bush and mattered not at all in the world of Obama.
But, we are always reminded, look at the equities of it. Let’s race to the bottom. Why should current mail users and postal ratepayers fund the retirement of today's Postal Service employees when those expenses can be pawned off on your children and grandchildren? That’s the next step in postal reform. That’s what stands in for fairness in the world of Obama.