Postal Service to Miss $5.5 Billion Payment to U.S. Treasury
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The U.S. Postal Service affirmed it won’t make a required $5.5 billion payment due tomorrow to the U.S. Treasury for future retirees’ health care, an obligation the agency said must end for it to become financially viable.
The service has said for months it couldn’t afford the payment, which was initially due last September, nor a $5.6 billion payment required by Sept. 30 for this year. Postal legislation passed by the U.S. Senate on April 25 would slow the schedule for those obligations. The House hasn’t acted on a different postal measure aimed at changes to help the service cope with declining mail volume.
“This has no effect on mail processing or delivery, no impact on post offices, and employees will continue to get paid,” Dave Partenheimer, a Postal Service spokesman, said today in a phone interview.
The Postal Service, which has more employees than any U.S.- based publicly traded company other than Wal-Mart Stores Inc. (WMT), lost $3.2 billion in the quarter ended March 31. It has said it expects to temporarily run out of cash in October unless Congress alters or ends the retiree health-care obligation and lets it make other changes that include ending Saturday mail delivery. The service also wants to withdraw from the U.S. government employees’ health-care plan and set up its own.
“The default by the Postal Service on its obligation to its own employees and retirees follows decades of mismanagement, and a willful blindness to fundamental changes in America’s use of mail,” Representative Darrell Issa, the California Republican who is chairman of the Oversight and Government Reform Committee, said in an e-mail. “The Postal Service continues to fail to do all it can under current law to cut costs.”
Issa is a co-author of a postal-overhaul bill that would mandate cost-cutting through measures that include closing post offices and possibly ending Saturday mail delivery. The bill, H.R. 2309, cleared the oversight committee in October and awaits consideration by the full House.
The Postal Service, while critical of elements in both proposals, has said it wants to see them pass so a compromise can be reached by a conference committee.
“Combining the legislative changes with changes we can make on our own under our current plan is the path we can take toward long-term financial stability,” Partenheimer said.
The service, which receives no direct funding from U.S. taxpayers and is supposed to be self-sustaining, last made a quarterly profit in 2009 and has said it is losing $25 million a day from operations. It has forecast it will lose $9.1 billion in the 12 months ending Sept. 30, not including the $5.5 billion payment.
Mail volume peaked in 2006 and has fallen more than 20 percent since then as much of the service’s first-class mail has been supplanted by e-mail and electronic bills. The Postal Service’s share of the U.S. small-package shipping market fell to 14 percent in 2011, behind United Parcel Service Inc. (UPS)’s 52 percent share and FedEx Corp. (FDX)’s 34 percent, according to Bloomberg Industries.
The service wants to eliminate as many as 220,000 jobs and close mail-processing plants to reduce costs. It abandoned a plan to shut as many as 12 percent of its post offices after opposition in Congress and instead said it would cut operating hours at as many as 13,000 locations to save $500 million annually.
The health-care obligation, adopted by Congress in 2006, isn’t necessary as the retiree-payment fund has $45 billion, enough to pay for decades of benefits, Fredric Rolando, president of the National Association of Letter Carriers union, said in a statement.
The “bogus default” shows Congress hasn’t done what’s needed to help the service overcome its woes, he said.
“If we thought our retired members were in danger of losing their health care, we’d be screaming bloody murder about it,” Rolando said.
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