USPS now has $13.1bn pension surplus, but no access to it
The struggling US Postal Service has now funded 105% of its pension benefit obligations and built up a $13.1bn surplus – but can’t touch any of it without Congressional action. A fresh calculation of the USPS pension surplus has been issued by the Office of the Inspector General with hopes that the US House of Representatives might consider a postal reform bill to rectify the situation next month.
The OIG report also notes that the Postal Service has now funded pumped $44.1bn into the federal coffers to fund 50% of its Congressionally mandated obligation to cover its retiree healthcare benefit obligations 40 years ahead.
It suggests that the Postal Service could use its $85bn property portfolio to cover the remaining $46bn of outstanding payments, to avoid further debt.
“In the past three fiscal years, the US Postal Service has sustained losses of more than $17bn. It is more critical than ever to reverse this trend,” said the OIG report.
“One of the greatest opportunities for cost savings has been the overfunded pension plan, including the Civil Service Retirement System and the Federal Employees Retirement System, and the prefunding of retiree health benefits.”
According to the latest monthly figures for USPS, the Postal Service made a $2.05bn loss in May 2012, but only $353m in losses stemmed from postal operations.
House Majority Leader Eric Cantor has scheduled a floor debate for the House postal reform bill – H.R.2309 – but that does not guarantee the debate will happen, particularly with attention diverted elsewhere in an election year.
While Republicans who control the House are not in favour of returning pension or healthcare funds to the Postal Service, because of the impact on the federal budget, the OIG is recommending the Postal Service keep up the pressure on Congress to enact reforms in this area.
Postal Rates
Meanwhile, the market-oriented think tank the Institute for Research on the Economics of Taxation has issued a Congressional Advisory note suggesting that USPS rates are too low.
Senior economist Michael Schuyler compares the Postal Service with other Posts around the world, and concludes that they are facing similar pressures from the Internet as USPS, but many remain profitable because their postal rates are higher.
The 45 cent stamp price is lower than rates in three quarters of other countries, the report states, and would have to increase by more than 33%, above 60 cents, to reach average levels.
“The fact that most foreign postal services are profitable and charge much more than USPS undermines claims that increased prices here would push USPS into a death spiral,” concludes Schuyler in the report, referring to claims that higher postal rates would push more USPS customers into using alternative communications channels.
“It is conceivable that at least a few foreign posts have healthier bottom lines than USPS not because they have smarter managers, less expensive workers, better designed networks, or are subject to less government interference, but simply because they charge more.”
But while it appears to dismiss the potential loss of customers from a major price increase, the IRET report does highlight a possible danger from such a move – that giving USPS a big increase in postal rates would offer breathing space to delay or water down operational changes the Postal Service needs to make to respond to lower mail volumes.
The IRET report suggests that despite “some missteps” the Postal Service has made some “impressive progress” in implementing operational changes so far.
It ultimately concludes that Congress needs to right-size postal rates as part of an “all of the above” reform package, with Schuyler stating: “Even with a rate increase, postal rates in this country would remain an international bargain.”
