Freshman Congressman Dennis Ross, the chairman of the subcommittee that oversees the US Postal Service, posted this analysis of what he calls “myths” about the USPS financial crisis:
Postal Service “Overpayment” – Myth v. Fact
Washington, Jun 24 –
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 workersâ€™ retiree health care payments. USPS is under its statutory prefunding requirement because â€“ although it was created to be a self-sustaining entity â€“ 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 â€œoverpaymentsâ€ as a result of these fluctuating balances.
Also today, Ross posted a link to the OPM Inspector General’s report on USPS finances on his Facebook page, along with this comment : “If anyone wants to read the reality of what the Postal Unions/USPS plans for the postal service would do to the taxpayer, just read the executive summary.” Curiously, the OPM IG’s report contradicts Ross’s third “myth”. In the executive summary that Ross says reflects “reality”, the IG’s office says it agrees with the USPS’s contention that either the FERS overpayment should be refunded to the agency, or that it be excused from making further payments until the excess is exhausted.
It should also be noted of course, that OPM is hardly an impartial observer here- every dollar of USPS pension overcharges is a dollar OPM doesn’t have to ask Congress to appropriate for the pensions of other federal employees. A further irony is that it was OPM, not the USPS, that uncovered the original CSRS overcharges (that are not in dispute) that Senator Susan Collins transformed into the “future retiree health benefits trust fund” in the 2006 PAEA law. The urgency of prefunding health benefits only came to light when it was discovered how much money the USPS had been overcharged, and the thought of having to give that money back provided a powerful incentive for Congress to come up with some rationale for keeping the money. That isn’t a myth- it’s reality.
The separate question of whether the USPS was overcharged for CSRS pensions by $50-75 billion over the course of its existence is open to debate. Even if it was overcharged, the question of who would actually be owed a refund is tricky- the mailers who paid the lion’s share of overcharges aren’t the same people who would benefit from lower postal rates today. But it seems clear that the mailing industry paid for more than its fair share of federal employees’ pensions over the years, relieving some of the burden that would have fallen on taxpayers. That industry, and the seven million people who depend on it for their livelihoods, deserve some consideration. Crippling the postal service will not help them, or the US economy.