U.S. Representative

Dennis A. Ross

Proudly Serving Florida's 15th Congressional District

Speeches and Floor Statements

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Postal Service "Overpayment" - Myth v. Fact

Postal Service "Overpayment" - Myth v. Fact

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Washington, June 24, 2011 | comments
Postal Service "Overpayment" - Myth v. Fact
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Highlights from the OPM Report on the United States Postal Service -

OPM- "Of great concern to us is the fact that during the course of our research, we did not find any viable projections indicating that the USPS will be able to restore its operations to profitability."

OPM - "The USPS has used its unique managerial independence to assume substantial obligations related to employee compensation, including retirement and health care liabilities that are in excess of what Government agencies are permitted to assume"

OPM - For example, under the Federal Health Insurance Program (FEHB), the Federal Government pays 72% of a weighted average of all FEHB program premiums.  In contrast, USPSs contribution rates for FEHB are "determined through a collective bargaining process with is unions" which has resulted is USPS paying 79% of premiums for most employees and 100% for PCES, USPS OIG directors and SES employees.

OPM - 2010 USPS Annual Report - "It is unlikely that, in the event of a cash shortfall, the federal government would cause or allow the Postal Service to cease operations" - relying on a bailout

OPM - "If the USPS stopped making payments into the CSRD fund, the Fund (ie the taxpayer) is legally obligated to make the pension payments to retirees."
USPS has said "the Postal Service will face annual losses as great as $33 billion by 2020"

OPM - "Before PAEAs (legislation) prefunding requirement took effect in FY 2007, the rate of growth of the USPSs operating expenses exceeded that of its operating revenue."

PMG Donahoe: "While the postal service appreciated the 2009 (deferral of $4 billion in prefunding) effort, it was a short term fix.  Further, even with the deferral the Postal Service's losses for 2009 totaled $3.8 billion."
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Myths v. Fact on the So Called "Overpayment"

Myth:
  The Postal Service has overpaid by $50-$75 billion into the Civil Service Retirement System and Congress owes this money back.

Fact:  There is no Postal Service overpayment.  In 1974, the Postal Service agreed to a formula to share the retiree costs of individuals who worked for both the Post Office Department and the Postal Service (which replaced the Department in 1971).  Now, more than 40 years later, the Postal Service argues that that formula is unfair.  The Postal Service argues that if a formula it considers to be fair had been used instead, than it would be owed $50-$75 billion by the US Treasury.  This is an attempt to rewrite history.  The original formula was instituted as part of a broader set of decisions concerning the creation of USPS.  For instance, those decisions included not charging any fee to USPS in return for the postal monopoly it was granted.  Another reason why it makes little sense to speak of an overpayment due to USPS is that the Postal Service had a clear requirement from 1971 until 2006 to raise postage rates to cover all costs, including its cost of retirement funding.  If a different formula had been used all these years that had resulted in lower annual payments by USPS for its federal employee retirement costs, those savings would have been used to lower the cost of postage rates.

Myth:  The Postal Service is unfairly saddled with an annual $5.5 billion retiree health care prefunding payment that is required of no other federal agency.  If only the prefunding requirement were eliminated the Postal Service would be profitable again.

Fact:  If the Postal Service were allowed to immediately cease prefunding of its retiree health care obligations, it would have an unfunded liability of nearly $100 billion by 2017.  This would clearly be an unaffordable burden for an entity whose core business and revenue is steadily shrinking.  It would likely result in a taxpayer funded bailout of postal workers’ retiree health care payments.  USPS is under its statutory prefunding requirement because – although it was created to be a self-sustaining entity – taxpayers stand behind the large and growing retiree health care liability.  Its also important to note that the annual deficit of the Postal Service now easily exceeds its entire annual prefunding payment, illustrating its fiscal problems run much deeper.

Myth:  The Postal Service has a FERS surplus of $6.9 billion that should be immediately returned.

Fact:  The Postal Service, in addition to a number of other federal agencies, has a temporary, projected surplus because interest rates have been at historically low rates.  Once interest rates inevitably begin to rise, that projected surplus may melt away leaving the Postal Service with a deficit it can ill afford to pay back.  Other federal agencies with temporary surpluses are not being granted refunds for “overpayments” as a result of these fluctuating balances. 

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