Billions newly found by Post Office means probably no postal hikes
Postal rates are likely to remain the same for another four years, thanks to money freed up from a retirement fund that the Postal Service had been overpaying.
Rates for postage last went up in June, and postal officials said they didn’t expect another increase until 2004. But they stretched their estimate Tuesday after announcing details from a new financial review.
That inspection revealed the Postal Service had been paying too much into the Civil Service Retirement System fund, which provides benefits for employees who joined the service by 1987. Postal workers who joined after that year were enrolled in another retirement system.
The review examined retirement payments since 1971 and determined that the post office is close to having paid off what it owes the fund for current and future retirees. The analysis revealed that the Postal Service’s liability to the retirement account is about $5 billion, rather than the $32 billion it believed it owed.
“The findings are the result of a number of factors, but the change was primarily driven by higher than expected yields on pension investments made by the Department of the Treasury,” Postmaster General John Potter told the service’s Board of Governors on Tuesday.
Current retirement contributions or future benefits to employees won’t be affected by the changes, he promised.
In addition to helping keep postage rates stable, the extra money will reduce Postal Service debt. The post office now hopes to reserve about $3 billion for debt reduction, rather than $800 million, in the current fiscal year that began Oct. 1.
“There are significant potential benefits for our rate payers,” Potter said about the windfall.
He warned, however, that “no one should be lulled into a sense of complacency that all is right with the nation’s postal system. That’s simply not true.”
“The nation still faces a long-term challenge to continue postal services to everyone, everywhere, while financing the costs of our growing nationwide delivery network,” he said. “We want to do it as we have for the past 20 years _ through postal revenues and without tax dollars.”
The federal Office of Personnel Management conducted the analysis, which was affirmed by the federal Office of Management and Budget and the Treasury Department.
Any changes to implement the money transfer must be approved by Congress. A staff member for the House Government Reform Committee, which oversees the Postal Service, said his office had just heard the announcement and was reviewing details. He said the changes did not appear at first glance to be controversial.
The post office finished the past fiscal year with a loss of about $1 billion. It had predicted a $1.35 billion deficit, but an aggressive cost-cutting campaign, include a major cut in staff, helped shrink the loss.
Postal revenues took a hit after the Sept. 11 terror attacks and the anthrax-by-mail episodes last year. The faltering economy also complicated things for the agency, sending mail volume down by 6 billion pieces, the biggest drop in history, Potter said.
Volume is starting to climb again, and the post office expects a modest increase next year will help boost the agency into the black, allowing it to begin reducing accumulated debt.
